Reuters: Hot Stocks: UK's FTSE climbs on US, Japan stimulus hopes, unfazed by downgrade

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UK's FTSE climbs on US, Japan stimulus hopes, unfazed by downgrade Feb 25th 2013, 12:08 Mon Feb 25, 2013 7:08am EST * FTSE 100 rises 0.7 percent * Cyclicals gain as UK shares shrug off sovereign downgrade * Weaker sterling, monetary easing seen as good for equities * Pearson leads fallers on flat earnings forecast By Alistair Smout LONDON, Feb 25 (Reuters) - Britain's top share index rose on Monday as investors welcomed signs that the United States and Japan would continue with ultra easy monetary policy for some time, and took a UK credit rating downgrade in its stride. Federal Reserve officials highlighted the merits of the U.S. central bank's bond-buying programme on Friday, helping send Wall Street higher, while sources in Japan said Tokyo was likely to nominate a proponent of aggressive monetary easing as its next central bank governor. Cyclical commodity stocks and banks, so-called as they tend to be geared to the economic cycle, were the best UK performers on Monday. The FTSE 100 was up 47.04 points, or 0.7 percent, at 6,382.74 at 1140 GMT, building on gains made on Friday. The index had fallen by 1.6 percent earlier in the week on concerns the Federal Reserve could end its stimulus programme sooner than expected. Financials added 21 points to the index even though Britain lost one of its prized triple-A credit ratings late on Friday when Moody's downgraded it. "I'd stop short of attributing any positivity to the downgrade but I don't think it's had any negative impact on risk appetite," said Matt Basi, senior sales trader at CMC Markets. He cited the share price performance of asset manager Schroders, up 2.8 percent, as an example of the appetite for equities. Schroders tends to benefit from demand for equities at large. "The market appears to be pricing a continuation of an influx of retail money into equity funds (the January numbers look very impressive) and pushing the stock higher," Basi said. "Of course there is the old adage that when every man and his dog want to buy stocks it's usually a good time to start taking some money off the table." Some saw the Moody's downgrade as good for equities, as it placed downward pressure on sterling, potentially helping UK exporters, as well as possibly improving the case for a more supportive monetary policy. Berenberg Bank said the UK rating downgrade was likely to mean slightly looser monetary and fiscal policy, which usually benefits equities. Meanwhile, Citi affirmed an overweight position on UK banks, seeing weak sterling as a positive for the sector and highlighting the outperformance of French banks following a sovereign downgrade late last year. British education and media group Pearson fell 5.5 percent, making it the heaviest faller on the FTSE 100, after saying it expects this year's earnings to be flat. "Pearson is too expensive and with increasing evidence of structural challenges that should drive significant consensus downgrade, we reiterate our Sell," analysts at Liberum said in a note. Pearson also saw the largest volume traded, with one and a half times its average 90-day volume traded by 1130 GMT. Reckitt Benckiser (RB) also fell in heavy volume, losing 3.7 percent after the U.S. drugs regulator rejected its call for stricter packaging for its heroin addiction treatment, instead approving generic production for the drug. (Editing by Hugh Lawson) Link this Share this Digg this Email Reprints

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