Reuters: Hot Stocks: Britain's FTSE edges lower as U.S. budget talks slow

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Britain's FTSE edges lower as U.S. budget talks slow Nov 28th 2012, 08:46 Wed Nov 28, 2012 3:46am EST * FTSE 100 down 0.4 pct to 5,776.03 pts * "Little progress" in U.S. talks prompts profit-taking * Investors bet on new fall to 5,600 - TJ Markets * U.S. fiscal deal would send FTSE to 5,900 By Francesco Canepa LONDON, Nov 28 (Reuters) - UK blue chips edged lower early on Monday as signs of sluggish progress in crucial U.S. budget talks fueled some profit-taking after recent, hefty gains. Growth-dependent cyclical stocks lead the retreat after U.S. Senate Majority Leader, Harry Reid, said there had been "little progress" among lawmakers in negotiations to avoid a 'fiscal cliff' of spending cuts and tax hikes that could stall the world's largest economy. At 0824 GMT, Britain's FTSE 100 was down 22.94 points, or 0.4 percent at 5,776.03 points, shedding all of Tuesday's gains and a fraction of last week's 213 points rally. The FTSE has been trading in a range comprised between 5,600 and 5,900 since August as a boost from monetary stimulus from the world's largest central banks was offset by concerns about a recession in part of the euro zone and uncertainty over the U.S. fiscal cliff. "We're seeing short positions coming on board with a view to closing at 5,600," Manoj Ladwa, head of trading at TJ Markets said. "(If a deal on the fiscal cliff is reached) you'll start seeing volumes returning back to the market and the index creeping up towards the high end of the range around 5,900." In a sign of the flight to safety on Wednesday, shares in defensive United Utilities topped the FTSE 100 leader board, up 2 percent after the multi-utility posted a rise in first-half revenues and said it was on track to meet regulatory outperformance targets. U.S. DEAL WOULD TRIGGER RALLY Reid's comments weighed on U.S. stocks late on Tuesday, with the U.S. Standard & Poor's 500 index, widely regarded as a global benchmark for equities, recording its worst day in eight sessions as it fell 0.5 percent to finish at 1,398.94. "We might fluctuate around here over the next week or two," Gerry Fowler, global head of equity Strategy at BNP Paribas, said, adding the S&P 500 may dip back down to 1,350 points or, as a low probability, 1,300 points. "But as long as we get some agreement, even if it's just the consensus postponement agreement, on the fiscal cliff, we'll probably be back comfortably above 1,400 on the S&P before the year-end." Fowler recommended buying calls on the S&P 500 to position for a 5-7 percent upside, possibly selling put or put spreads option to pay for that trade. He added that the U.S. benchmark could rise as much as 10 or 15 percent if U.S. lawmakers produce an agreement on a long-term deficit reduction plan, although he attached a mere 10-20 percent probability to this scenario. (Reporting By Francesco Canepa; Editing by Toby Chopra) Link this Share this Digg this Email Reprints

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