UK stocks : FTSE 100 index up 0.4 pct

Dec 20 2012, 01:18 IST
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SummaryBritain's blue-chip share index scaled fresh nine-month highs on Wednesday.

Britain's blue-chip share index scaled fresh nine-month highs on Wednesday on growing expectations of a U.S. budget deal, and nearing tough technical resistance levels en-route to the psychologically key 6,000 mark.

Although the U.S. political ping-pong continued, the main parties looked to be closing in on an agreement to avoid the 'fiscal cliff' of tax hikes and spending cuts that threaten to depress the world's biggest economy next year.

A deal would potentially pave the way for a year-end stock rally as investors seek a last-minute boost to their annual returns, which traders said could see Britain's FTSE 100 reach 6,000 points for the first time since July 2011. Such flows have helped the index gain for the past nine Decembers in a row.

"I don't see anybody looking to sell the market," said Max Bascombe, institutional sales trader at Merchant Securities.

"The market will move on the basis of the balance of sentiment but ... one way or another something will be muddled through. The (United) States isn't going to go to the wall. If they don't come to agreement, everybody loses."

The UK benchmark gained 25.69 points, or 0.4 percent, to finish at 5,961.59. However, it failed to hold on to the nine-month intra-day high of 5,977.82 points and technical analysts said the path to 6,000 will be feature tough hurdles.

The March closing level of 5,965.58 points and that month's intra-day peak of 5,989.07 points will be key.

"Fifty-two week highs are often not easy to overcome, we probably need a few goes," said Bill McNamara, technical analyst at Charles Stanley.

"It is entirely possible that the FTSE will go through 6,000 by the year-end. And if a deal (on the fiscal cliff) is done, even if it's not great deal, then we could even get to 6,100."

Banks were the biggest gainers, up 1.8 percent, on some relief following an as-expected fine for Swiss peer UBS over rigging of Libor interbank rates - a scandal which has also embroiled most of the big UK names.

Banks also got a boost from a sector upgrade by Credit Suisse, which lifted European banks to 'benchmark' from 'underweight', with a preference for UK names.

"The UK looks particularly appealing because we see some signs of relative resilience in UK GDP growth and, above all, there is better coordination between the central bank and the Treasury than in any other country," Credit Suisse said in its Global Equity Strategy 2013

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