Reuters: Hot Stocks: FTSE pressured as U.S. fiscal hopes wane

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FTSE pressured as U.S. fiscal hopes wane Dec 21st 2012, 12:11 Fri Dec 21, 2012 7:11am EST * FTSE 100 sheds 0.7 percent * U.S. Republicans reject U.S. fiscal cliff concessions * Miners weak; ENRC knocked by Goldman Sachs downgrade * Carnival picks up as Deutsche Banks stays positive By Tricia Wright LONDON, Dec 21 (Reuters) - Britain's blue chip share index fell on Friday, the last full trading day before Christmas, as renewed uncertainty surrounding U.S. budget talks dealt a sharp blow to investor sentiment. U.S. Republican lawmakers have rejected party leader John Boehner's proposal designed to win concessions from President Barack Obama in the fiscal "cliff" talks, reviving fears of $600 billion worth of tax hikes and spending cuts that threaten the U.S. economy. "The general expectation would be for agreement, so if it turns out that there's a poor agreement delaying a number of issues until the spring but skating away from the immediate catastrophe of January, or no agreement at all - that clearly is not priced into market expectations," said Andrew Milligan, head of global strategy at Standard Life Investments, which has 163.4 billion pounds ($265.7 billion) of assets under management. "I think (a lack of agreement) would encourage people even more to go into the dividend yield type stocks ... And clearly the stocks that are more associated with global trade would be the ones that investors would be pulling back from." Resolution, RSA Insurance, Admiral, Aviva and Vodafone have the highest dividend yields on the FTSE 100 index, according to Thomson Reuters data. Milligan did, however, stress that no deal by the start of January would not mean a transformation of the U.S. economy, rather that "headwinds become harder". Falls in heavyweight mining shares, energy , and banking stocks were the main drag on UK blue chips, with the three sectors together accounting for 18 points, or nearly half, of the FTSE 100's decline. At 1145 GMT, the FTSE 100 index was down 42.10 points, or 0.7 percent, at 5,916.24. It closed 0.05 percent lower on Thursday after stalling around nine-month highs in its attempts to recapture 6,000, which has acted as a resistance level twice since July 2011. Phil Roberts, Barclays Capital's chief European technical strategist, reckons a break through 5,881, the low of Dec 17, could spell a correction to the 5,850 area, just beneath the trough on Dec. 4. From there he expects the index to stabilise. "Patience ... In essence the story of 2012 has been a slow, choppy, painful rally: every time it looks really bid and looks like it's breaking out it goes down, and every time it looks really offered it comes back," he said. Kazakhstan-focused miner ENRC shed 1.4 percent, with traders citing the impact of a Goldman Sachs downgrade of its rating to "neutral" from "buy". "We believe the stock may trade sideways until the market regains confidence in ENRC's execution ... and capital allocation decisions, particularly cash returns to shareholders," Goldman said in a note. The bank also pointed out that to meet the liquidity requirement to maintain inclusion in the FTSE 100 index, ENRC must make a share placement in 2013, raising cash but also weighing on its share price in the near term. On the upside, cruise operator Carnival gained 3.1 percent to 2,466 pence to top the FTSE 100 leader board, recovering some of the previous session's steep losses following a cautious 2013 outlook and helped by Deutsche Bank staying positive on the stock. "We think management is being overly conservative with its guidance given current U.S. "fiscal cliff" noise and shorter booking window," Deutsche Bank said in a note, reiterating its "buy" rating and 2,930 price target on Carnival. "We have retained our forecasts and we would expect company net yield guidance to rise to our forecast as we move through H1/13 and the important "wave season", the bank said. "We ... would use any near-term share price weakness as a buying opportunity." ($1 = 0.6150 British pounds) (Editing by Susan Fenton) Link this Share this Digg this Email Reprints

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