Investors waiting for Greece put the brakes on FTSE rally
BRITAIN’S blue chips closed a touch lower yesterday as investors awaited more clarity on a Greek debt deal.
Greek party leaders gathered to agree reforms needed to secure a new EU/IMF rescue package necessary to avoid a chaotic default that would aggravate Europe’s financial crisis.
Rating agency Standard & Poor’s added pressure on negotiations between Greece and private bond holders by stating Athens will likely not achieve sustainable debt levels with a 70 per cent reduction in the value of bonds held by its private creditors.
Uncertainty over Greece’s future weighed on Britain’s blue chip index, which closed 14.33 points lower, or 0.2 per cent, at 5,875.93 points, having traded 92 per cent of an already anaemic 90-day volume average and after hitting a six-month high of 5,916.20 in intra-day trade.
“My central case is that they will vote to do the cuts and they will try above everything to stay in the euro,” said Jane Coffey of Royal London Asset Management.
“There has to be a 20 per cent risk that this is not possible and this is why I don’t want to be completely on that bet.”
Some banking shares such as Lloyds Banking Group extended gains, boosted by positive broker comments as Citigroup suggested the recent rally had still some room to run.
“Share observation of previous financial crises suggests that bank share prices usually trough only 1-2 years after the peak in loans and 3-5 years before the de-leveraging process completes. UK bank lending peaked in December 2009,” Andrew Coombs, analyst at Citi said.
Societe Generale, meanwhile, highlighted RBS, HSBC and Standard Chartered among those best positioned to navigate the current interbank lending drought.
Barclays, however, closed down 1.3 per cent while Royal Bank of Scotland lost 0.1 per cent.
Also strong was Reckitt Benckiser, which topped the FTSE 100 with a 2.9 per cent rise, as the consumer goods group’s full-year results beat market expectations.
BHP Billiton was among the worst performers, falling 2.3 per cent as the world’s biggest miner reported a rare fall in earnings.
March futures on the FTSE 100, which settled at 5,828, indicated the market had entered into a consolidation phase and further declines were likely, although their extent was expected to be limited, Nicolas Suiffet, a technical analyst at Trading Central, said.
“Intraday momentum oscillators are turning down from their overbought territories and call for a further decline towards the 38.2 per cent Fibonacci retracement level at 5,770,” Suiffet said.
“However, the downward potential is likely to be limited by either the 50 per cent Fibonacci retracement level at 5,744 or the rising 20-day moving average currently at 5,710.”
Outside the top flight, Mothercare gained 7.5 per cent after it announced that Lovefilm chief executive Simon Calver was joining to lead the firm.
And Supergroup plunged more than 17 per cent on the back of the retailer’s profit warning.
Misys tumbled 8.5 per cent after management recommended its £2bn merger with Tenemos.