Reuters: Hot Stocks: UK shares hit one month highs but lag record-setting Europe

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UK shares hit one month highs but lag record-setting Europe Dec 6th 2012, 12:14 Thu Dec 6, 2012 7:14am EST * FTSE index up 0.2 percent * Cyclicals lift UK less than European peers * Volumes light ahead of central bank decisions By Alistair Smout LONDON, Dec 6 (Reuters) - Britain's top share index hit a one month high on Thursday, but lagged European peers as its defensive stocks weighed and held it below previous year-highs ahead of the European Central Bank policy decision. The FTSE 100 failed to sustain a break through the 5,920 level, which it has tested four times since September, even as the euro zone's blue-chip Euro STOXX 50 equity index set a fresh 2012 high, breaching a previous resistance level that was around the 2,610 point level. At 1119 GMT, the FTSE 100 was up 14.25 points at 5,906.33. The index's 0.2 percent rise lagged the German DAX and the pan-European FTSEurofirst 300, up 1 and 0.4 percent respectively. The Bank of England left monetary policy unchanged, a month after pausing its 375 billion pound programme of bond purchases, as sticky inflation outweighs concerns about a sluggish economy. Sectors that are most sensitive to changes in economic sentiment, known as cyclicals, did the best, with miners, financials and basic materials adding 14 points and accounting for nearly all of the FTSE's gains. "The defensive sectors are breaking down relative to the cyclical sectors... and as the FTSE is much more defensive relative to the other markets, that's why I think it's underperforming today." Nick Xanders, head of European equity strategy at brokerage BTIG, said. Helping sentiment were signs that compromise over the so-called fiscal cliff of $600 billion in tax rises and spending cuts which could push the United States in to recession was close. Xanders said that divisions in the Republican party may indicate a softening stance on taxes, raising hopes of a deal before the end of year deadline. "If [the Speaker of the U.S. House of Representatives, John Boehner] has to soften his stance and raise taxes, then we get a deal and we're not over the cliff," he said. "There's still a lot of work to be done, but there's a feeling that we could get something done, which would be a huge relief to the markets." U.S. President Barack Obama said on Wednesday that a deal was possible within a week, helping to support U.S. stocks. The mining sector extended the previous session's advance on hopes for improved demand from the world's top metals consumer after the China said they would approve policies aimed at helping economic recovery. Banks also benefitted as the sector seemed to be drawing a line under a scandal hit year. Standard Chartered led the advance, adding 1.1 percent after the Asia-focused lender said in a trading update it expects to pay $330 million to settle a case with U.S. regulators who accuse the bank of failing to comply with sanctions against Iran. Rolls-Royce was among the biggest blue chip fallers, down 3.0 percent as the aerospace and defence group said it had passed information to Britain's Serious Fraud Office relating to concerns about bribery and corruption involving its intermediaries overseas. Activity was light early in the session, with just a quarter of the average 90-day volume traded, ahead of the final ECB policy decision of 2012. The bank is also expected to leave interest rates at record low levels but may give a guidance to next year's policy path. "The markets will be looking for hints as to whether officials will lower their growth forecasts for the euro zone following further financial deteriorations in some euro zone nations," Shavaz Dhalla, Financials Trader at SpreadEx, said. "This is also likely to be followed with reassuring comments from ECB officials, but going with past experience, this is unlikely to infuse much optimism into the markets." (Additional reporting by Jon Hopkins; Editing by Toby Chopra) Link this Share this Digg this Email Reprints

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