FTSE retreats from half-year highs reached after Federal Reserve fillip

BRITAIN’S FTSE 100 retreated from half-year highs yesterday, in what strategists said was likely to be a profit-taking pause in a threemonth- long rally stimulated by global central banks.

The benchmark share index has risen some 12 per cent since the start of June, propelled by expectations of central bank action that took effect in the last two weeks.

The US Federal Reserve announced a third round of quantitative easing last week, following the European Central Bank which outlined bond-buying plans early in the month.

But hurdles still remain, not least the need for Spain to formally ask for help and agree to stringent terms before the ECB can start buying its bonds – something Spanish Prime Minister Mariano Rajoy seems in no hurry to do.

“We do believe it will be positive for risk assets in the shorter term but there are some issues,” said James Butterfill, equity strategist at Coutts.

“Perhaps the market is being cautious (because) it seems that Rajoy is not willing to ask for any form of bailout and perhaps in order for Spain to ask for any kind of bailout the markets will have to force it.”

Tensions in the Middle East also weighed. The United States and its allies launched a major naval exercise in the Gulf in a bid to keep oil shipping lanes open as Israel and Iran traded threats of war.

The FTSE 100 closed down 22.03 points or 0.4 per cent at 5,893.52 points, erasing less than a third of the previous session’s jump on news of the Fed’s plans to pump $40bn a month into the world’s biggest economy.