FTSE at five and a half year high on solid results

THE UK’S top share index hit a five and a half year closing high yesterday, bolstered by solid corporate earnings newsflow and robust Chinese trade data.

The FTSE 100 ended up 26.18 points, or 0.4 per cent, at 6,583.48, its highest close since November 2007.

Earnings were in focus, with engineering turnaround specialist Melrose Industries, software group Sage and clothing retailer Next among the big FTSE 100 risers on solid trading and result updates.

Standard Chartered, however, sank 4.4 per cent after the bank posted lower profits, although both Investec Securities and Nomura saw the share price weakness as a buying opportunity.

The UK benchmark has risen 11.6 per cent in 2013, building on a near six per cent advance last year, as interest rate cuts and injections of liquidity by central banks around the world lift equity markets despite a stuttering global economy.

Traders yesterday saw scope for yet more near-term gains on the FTSE 100 back towards its 2007 high of 6,754, with many plumping for equities over bonds due to better returns on offer.

“With so much data (remaining in) that so-called Goldilocks bracket – not too bad, but not so great that central bankers can withdraw stimulus – there has to be every chance that the (peak) we saw six years ago will fall soon enough,” said Mike McCudden, head of derivatives at Interactive Investor.

Heavyweight mining stocks were in demand, adding around six points to the index, aided by trade data out of top metals consumer China that showed the country’s exports and imports grew more than expected in April.

While remaining “cautiously optimistic” on the FTSE 100, Commerzbank economist Peter Dixon recognised there are limits as to how quickly the world economy will be able to grow – the “decisive factor” for the index.

Dixon said that while European equities were hardly a “screaming buy” on valuation grounds, insurers looked attractive.

The sector trades on a 12-month forward price-to-earnings ratio of 9.7 times against the Stoxx 600 on 12.5 times, according to Thomson Reuters StarMine data.

The FTSE 100’s gains were capped by a fall in the value of stocks trading without the attraction of their latest dividend.

Aberdeen Asset Management, Antofagasta, BP, Bunzl, GlaxoSmithKline, Kingfisher, Randgold Resources and Unilever weighed down on the index to the tune of 10.91 points.