FTSE flat as investors await news of Fed’s monetary policy

BRITAIN’S top share index ended flat yesterday ahead of Federal Reserve Chairman Ben Bernanke’s news conference which could provide clues on the Fed’s future plans for its monetary policy.

The blue-chip FTSE 100 was down 1.2 points or 0.02 per cent at 6,068.16, having hit a 9-week closing high on Tuesday.

Volume was only 87.6 per cent of the 90-day average.

The index had earlier been as high as 6,089.40 buoyed by hopes cheaper money would raise demand for equities after the prospect of a UK interest rate hike in the short term decreased following GDP data.

“UK GDP had kept the FTSE 100 up, because it was not worse than expected,” Mark Priest, senior equities trader at ETX Capital in London, said.

“Investors are cautious ahead of Bernanke. It depends exactly what he says, everyone is waiting to hear his plans on quantitative easing and how he sees the economy heading.”

The Fed’s ultra-easy monetary policy has buoyed demand for riskier assets and comments from the Federal Reserve could shed light on the central bank’s future plans for interest rates and quantitative easing.

Banks featured among the worst performers as investors sold out of riskier assets. Barclays fell 4.8 per cent after first-quarter profit missed forecasts.

In other earnings news, Associated British Foods dropped 5.8 per cent after the food producer said it will cut its margins at its Primark retail chain and absorb higher costs to maintain its market share, prompting analysts to trim their full-year earnings forecasts.

Aggreko jumped 4.4 per cent after the British temporary power provider said it sees trading profit slightly ahead of 2010.

ITV lost 3.9 per cent after Barclays Capital downgraded its rating for the British commercial broadcaster to “equal-weight” from “overweight”.

The FTSE 100 was testing resistance levels of around 6,070, the level the index retraced from in early April.

David Jones, chief market strategist at IG Index, said the FTSE would need to break through the year’s high at around 6,105 before fresh momentum comes into the market.

Meanwhile, companies trading ex-dividend knocked 5.64 points off the FTSE 100 index, with ARM Holdings, Centrica, Fresnillo, Smith & Nephew, and Tesco all losing their payout attractions.

Meanwhile strong corporate earnings in the technology and auto sector pushed up European shares.

The pan-European FTSEurofirst 300 index of top shares closed 0.3 per cent higher at 1,147.24 points, its highest close since early March, though volumes were below its 90-day average.

Wider gains on the index, however, tempered by persistent fears that highly indebted Greece will need to restructure its debt, pushed Greek government bond yields to euro lifetime high and hit its banking shares which shed 3.6 per cent.

In a positive trend for equities, the Euro STOXX 50, the Eurozone’s blue chip index, held significantly above its 50-day moving average of 2,931.62, and analysts said the bullish trend remained intact for now.

“The short-term upward bias for equities remains up, confirming the current risk-on situation on the financial markets,” said ING’s Roelof-Jan Van den Akker.

“A close above the previous highs around 2,992 opens the way for a test of the longer-term crucial resistance in the line chart around the 3,100 level,” he said.