Reuters: Hot Stocks: FTSE dips ahead of U.S. jobs data, grim UK economy

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FTSE dips ahead of U.S. jobs data, grim UK economy Dec 7th 2012, 13:01 Fri Dec 7, 2012 8:01am EST * FTSE 100 down 0.1 percent * Factories show UK economy on verge of shrinking again * M&S big faller on Goldman downgrade * Berkeley hits all-time high on strong profit By Tricia Wright LONDON, Dec 7 (Reuters) - Britain's top share index dipped on Friday in thin trade as caution set in ahead of a key U.S. jobs report, while a grim outlook for the UK economy took its toll on sentiment. The FTSE 100 was down 0.1 percent at 5,894.65 by 1228 GMT, having ended at its highest level since mid-October on Thursday. Volumes were light, at 23 percent of the 90-day daily average, reflecting investors' reluctance to get involved before the November U.S. non-farm payrolls report at 1330 GMT, which is expected to be weaker than October's, hit by superstorm Sandy. "A lot of people aren't going to react before we get payrolls," Joshua Raymond, chief market strategist at City Index, said. Gloomy UK economic data dampened the mood, with British industrial production unexpectedly falling in October after factory output posted its biggest drop since June, fuelling fears the economy will shrink again at the end of this year. Retailers, inextricably linked to the state of the UK economy, were out of favour, led down by a 1.2 percent drop in Marks & Spencer. Goldman Sachs downgraded its rating for M&S to "sell", with the investment bank deterred by a lack of focus on online operations. "Given Marks & Spencer's strategy of focusing its investment on a capital-intensive store base over the past six years, rather than investing in capital-light online operations, we believe the company will continue to experience declining returns on investment in the medium term," Goldman analysts said in a UK retail sector review. As part of the review, Goldman also hiked its rating for Next to "neutral", noting that through high returns of its online business, it has markedly stepped up capital returns to shareholders. Next, which rose to a new all-time high on Thursday, shed 0.1 percent, with its 14-day relative strength index near to 70 in a sign it might be getting overvalued. The rally of more than 5 percent in the last two weeks on the FTSE 100, fuelled by an easing of worries over the euro zone and the U.S. "fiscal cliff", has left the index at the top of a range established since September. Some technical analysts are relatively upbeat. "I'm reasonably constructive but not super-bullish because you've still got the highs from earlier this year (5,989) and the highs from 2011 (6,105) as well," Phil Roberts, chief European technical strategist at Barclays Capital, said. "I'm still thinking that it's unlikely to just blast through these levels without touching the side." On the upside, housebuilder Berkeley Group was the biggest mid cap gainer, rising 4.2 percent to an all-time high after the company unveiled a 41 percent rise in pre-tax profit for the six months to end-October and declared its first dividend since 2008. Richard Curr, head of dealing at Prime Markets said: "(We) believe the scale of the success here will continue to drive the shares higher into Q1 2013, and we expect our initial target of 1,750 pence to be hit in the coming 7-10 days. Buy." (Reporting by Tricia Wright) Link this Share this Digg this Email Reprints

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