Footsie hits new peak as miners rally
BRITAIN’S top share index hit new four-and-a-half year peaks yesterday, with a strong rally in miners outweighing concerns about continuing problems in the banking sector.
US data offered fresh proof of improvement in the world’s biggest economy, with a strong pick-up in housing prices following above-forecast durable goods data the previous session.
The numbers supported oil and copper prices yesterday, in turn boosting Britain’s heavyweight energy and mining stocks, which together added some 13 points to the FTSE-100.
The benchmark UK index closed up 44.78 points, or 0.7%, at 6339.19, posting its best finish since May 2008 as traders used a mid-session dip as an attractive entry point.
With the Footsie already up 7.5% since the start of the year and in overbought territory on the seven and 14-day relative strength indexes, some analysts are warning the case is building for a correction or at least a consolidation, and recommending investors look to book profits.
However, so far, the market has continued to grind higher, posting gains in eight of the past nine sessions.
“We are looking very strong at the moment, it seems we are shrugging off any bad news. The miners are having a good day, we’ve some good data out from America,” said Jonathan Roy of London Stone Securities.
“I think we will see a correction at some point, it will be a surprise that gets us moving back down towards 6000. (But) for the moment I would probably be moving up stop-losses rather than taking profits.” 249 3183 4743 2663 19291 7661 3017 2255 2241 1181 527 3453 3731 1141 2941 1080 1033 2173 8301 3491 +16 +93 +141 +77 +57 +211 +81 +61 +51 +23 -31 -22 -211 -53 -103 -38 -31 -65 -25 -10 +6.87 +3.17 +3.11 +3.05 +3.04 +2.89 +2.79 +2.78 +2.52 +2.33 -6.12 -5.98 -5.38 -4.83 -3.51 -3.40 -3.09 -2.95 -2.92 -2.78
The latest rally and the improved sentiment have put corporate news back in the limelight after months of all stocks moving in the same direction depending on risk appetite. As such, investors welcomed greater clarity from Anglo American on its troubled Minas Rio iron ore project, helping shares in the miner to add 3%.
In contrast, banks suffered, with Royal Bank of Scotland off 6% after the Wall Street Journal reported that the lender is close to a £500 million settlement with US and British authorities over Libor, returning the interbank rate-fixing scandal to the front of investors’ minds.
With UK banks already up some 11% since the start of 2013 the concerns about problems in the financial sector gave a cue for some profit-taking. Cautious comments from several investment banks also weighed on sentiment. US stocks advanced yesterday, led by defensive sectors, in a sign the cash piles recently moving into the market are being put to use by cautious investors to pick up more gains.
The SP 500 is on track to post its best monthly performance since October 2011 and its best January since 1997 as investors poured $55 billion in new cash into stock mutual funds and exchange-traded funds in January, the biggest monthly inflow on record. The Dow Jones industrial average has been flirting with 14,000, a level it hasn’t seen since October 2007.
Shares of Amazon.comjumped nearly 7% in extended trade after the world’s largest Internet retailer posted fourth-quarter revenue that jumped 22% to $21.27 billion. It closed down 5.7% at $260.35 in regular trading.
Amongrising defensive shares, which are companies relatively immune to economic swings, were drugmaker Pfizer, up 3.2% to $27.70 after posting earnings and ATT, 1.6% higher at $34.68.
The SP hovered near 1500, and market technicians say the benchmark is at an inflection point which will determine the overall near term direction.
“The public is pouring in now,” said Carter Worth, chief market technician at Oppenheimer Co in New York. “It reflects complacency and that typically leads to hubris, and hubris leads to trouble. Everyone’s buying.”