FTSE rebounds after four-week stretch of losses

BRITAIN’S top share index gained yesterday, with some investors seeing value in the market after a four-week sell-off, and with stronger US housing data boosting sentiment on construction and engineering stocks.

The FTSE 100 index closed up 22.23 points, or 0.4 per cent, at 6,330.49 points.

The slight rebound came after four straight weeks of losses – the British benchmark’s longest down run in 14 months – driven by concern that the US Federal Reserve could become the first major central bank to scale back the plentiful stimulus that has supported global equities in the past year.

Markets were expected to remain jittery through the Fed’s policy meeting today and tomorrow, but with the FTSE 100 down over five per cent in the past month, some were starting to see attractive opportunities among individual stocks.

Resolution added 3.1 per cent after JP Morgan raised its price target on the insurer and highlighted its attractive dividend yield, while consumer health and hygiene group Reckitt Benckiser gained two per cent following an upgrade from Citi saying the stock was undervalued.

Investors also took some comfort from US data showing an improvement in home builder sentiment in June and a pick up in a regional survey of the manufacturing sector.

“You’ve got economies in North America showing increases in GDP estimates, the UK is turning definitely ... so I would tend to be quite bullish,” said Tim Steer, fund manager at Artemis. “UK companies are in good nick, a little bit cheaper over the last month ... and many of them are very international. They have been through a tough time over the last five years, so much of the competition has gone by the way side and balance sheets are very strong.”

Steer’s top picks included British retailers, travel stocks like Easyjet, as well as companies focused on the US construction sector such as Weir and Wolseley. They added 2.2 and one per cent, respectively, extending gains after the data on the US housing market Heavyweight Vodafone was another top gainer, up 1.6 per cent amid talk of merger and acquisition activity in the European telecoms sector.

The broad rebound in British stocks was also supported by technicals, with charts pointing to a brighter outlook for the FTSE 100 after it tested support around five-month lows on Thursday before closing much higher that day.