Popularity of defensive stocks sees FTSE rise but Spanish fears remain

BRITAIN’S benchmark share index rose yesterday, driven by gains in “defensive” stocks seen as the most resilient to an economic downturn, although traders said concerns over Spain’s debt crisis could limit gains.

The blue-chip FTSE 100 index closed up 0.3 per cent, or 16.36 points higher, at 5,825.81 points.

Increases in heavyweight “defensive” stocks such as global bank HSBC, telecoms group Vodafone and oil major BP, all of which are often favoured for their dividend yields, contributed to much of the rise on the FTSE. Traders said the fact that the FTSE had held above 5,800 points, seen as key by technical traders to propelling further gains, was also encouraging investors to buy the index.

The FTSE 100 also stayed above its 200-day simple moving average level around 5,700 points, another sign to technical traders that it has room for more gains.

International Airlines Group, formed by the merger of British Airways and Iberia, topped the FTSE 100 leaderboard with a rise of around three per cent as it reported a rise in September traffic numbers.

Software company Arm also rose 2.1 per cent, with traders citing speculation that it could benefit from the launch of a new iPad device by Apple, which uses Arm’s technology for its products.

The FTSE 100 has risen around 11 per cent from a year-low of 5,229.76 points on 1 June, as equity markets were boosted by steps taken by central banks from July onwards to inject fresh liquidity and fend off a global economic slowdown. It has been stuck within a tight trading range of around 100 points over the past week.