Reuters: Hot Stocks: Britain's FTSE touches fresh peaks, charts flag pull-back

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Britain's FTSE touches fresh peaks, charts flag pull-back May 16th 2013, 10:46 Thu May 16, 2013 6:46am EDT * FTSE up 0.1 pct, on track for 11th session of gains * Technical charts show case building for a correction * Any pullback could prompt a wave of buying By Toni Vorobyova LONDON, May 16 (Reuters) - Britain's top share index nudged to fresh 5-1/2 year highs on Thursday, backed by some solid corporate earnings, but after 10 straight sessions of gains, technical charts show increasing risk of a correction. News of strong business growth at Aviva helped shares in the insurer add 6.5 percent, while Easyjet and Tui Travel gained as analysts translated their results on Wednesday into upgrades. To date, some 75 percent of Britain's large and mid-caps have met or beaten first quarter earnings expectations, compared with just 46 percent of euro zone peers, according to Thomson Reuters StarMine data. The solid earnings have helped the FTSE 100 rise 13.5 percent this year, more than double the gains seen on the EuroSTOXX 50. However there are signs the British index is losing momentum. After setting a fresh peak at 6,707.65 points on Thursday, it trimmed the gains to trade up 8.31 points or 0.1 percent at 6,701.86 by 1022 GMT. "In the very near term, there is risk for a pullback. The daily studies are quite overbought and there is intraday bear divergence on the hourly relative strength index and momentum studies," said Ed Blake, technical analyst at Informa Global Markets, highlighting the May 10 low at 6,591.58 points as the first target on the downside. However, with equities still offering much higher yields than government bonds and with central bank stimulus - a key driver of the market rally over the past year - expected to remain in place for some time to come, any pullbacks could prove short lived, with investors keen to buy on dips. "The valuations are not demanding, the market is trading on just over 12 times 12-month forward earnings. There is a highly supportive policy environment, both in the UK and elsewhere, so there is plenty of scope for multiples to expand further," said Darren Winder, strategist at Oriel Securities. Investors have reduced their net underweight on UK equities to 5 percent this month from 21 percent in December, according to Bank of America Merrill Lynch's funds survey, although there is still a long way to go to reach the strongly overweight levels seen from 2003 to mid-2008. (Editing by Ruth Pitchford) Link this Share this Digg this Email Reprints

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