Reuters: Hot Stocks: Britain's FTSE hits 3-week high on ECB stimulus bets

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Britain's FTSE hits 3-week high on ECB stimulus bets Apr 24th 2013, 10:59 Wed Apr 24, 2013 6:59am EDT * FTSE 100 hits 3-week high at 6,438.51 * Weak German data boosts expectations of ECB action * Miners recover, but many investors still cautious By Toni Vorobyova LONDON, April 24 (Reuters) - Britain's top share index hit three week highs on Wednesday, with weak German data bolstering expectations of a rate cut in the euro zone and sending investors into equities in search of yield. German business morale, as measured by the keenly-watched Ifo index, tumbled in April, missing even the most pessimistic economist's forecast. Although signs of weakness in the euro zone economy are bad news for British companies given strong trade links, equity markets put a positive spin on the data, expecting it to prompt an interest rate cut from the European Central Bank next week. Lower rates make stock more appealing compared to bonds and also reduce borrowing costs for companies, supporting profits. "The expectations is that the ECB are going to do something to create additional liquidity or even possibly rate cuts ... We will certainly see a small rally off the ECB doing something, if they do," said Neil Marsh, strategist at Newedge. "If they don't, then I think markets are going to be a little disappointed and possibly sell off a little, but the overall general sentiment is OK. Earnings are coming in better than some analysts had suggested and forecasts aren't too disappointing." The FTSE 100 was up 1.01 points at 6,407.13 by 1029 GMT, just below an earlier three-week high of 6,438.51 . Miners and industrial metals, which are heavily exposed to efforts to revive the global economy, topped the list of gainers on Wednesday, adding 2.9 and 3.7 percent respectively. But some investors remained cautious on what are the two worst performing sectors so far this year. "There will be a time to buy the miners, but I don't think it's quite yet. I think there is more bad news to come out in terms of prices and earnings," said Simon King, fund manager at Premier Asset Management. However, he added that - given the FTSE's strong performance so far this year - it was getting increasingly hard to find attractive prices among quality companies. "People are going into equities because they can't find anything else," he said. "I have been slightly surprised by the strength of the market, I think it has come largely from private investors putting money to work in the market, certainly flows have increased to the unit trusts  I can understand why - they are doing it - the world is desperate for income and equities provide a bit of that." Net retail sales of equity funds reached 940 million pounds ($1.44 billion) in February, their highest in nearly two years, according to the latest data from Britain's Investment Management Association (IMA), which also showed bond funds suffering heavy redemptions. Increased investors activity helped bolster profits at Standard Life, sending its shares up 6.2 percent on Wednesday, at the top of the FTSE 100 gainers board. On the flip side, Barclays dropped 1.7 percent after posting a drop in profit, with weak revenues outside of its investment banking unit and higher costs. Gains on the FTSE were also capped by a number of companies trading without the entitlement to dividend on Wednesday, taking around 9 points off the index. ($1 = 0.6542 British pounds) (Editing by Toby Chopra) Link this Share this Digg this Email Reprints

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