Reuters: Hot Stocks: REFILE-Britain's FTSE gains in volatile options expiry trade

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REFILE-Britain's FTSE gains in volatile options expiry trade May 17th 2013, 11:26 Fri May 17, 2013 7:26am EDT (Adds dropped word in quote in fifth paragraph) * FTSE 100 up 0.3 percent * Demand to see index above 6,700 as option expiry nears * Index shrugs off Fed policy chatter after early wobble * Lloyds leads banks higher, defensive sectors hit By Alistair Smout LONDON, May 17 (Reuters) - Britain's FTSE edged higher in volatile trade on Friday, as demand to buy the index on options expiry day helped counteract early weakness after central bankers voiced concerns over U.S. monetary easing. By 1031 GMT, the FTSE 100 was up 21.03 points, or 0.3 percent, at 6,708.83, having dipped to 6,682.04 earlier in the session. As options expired mid-morning on Friday, there was buying pressure to lift the index above 6,650 and 6,700 levels, where there were a lot of open "call" positions. As a right to buy the index at a certain level, these positions would be worthless if the index was below that level when the options expired. "I think the move that we've seen in mid-morning trade is definitely options expiry driven, pushing up towards the 6,700 level," David Jones, market analyst at IG Index, said. "Whenever we've seen the FTSE dip back towards 6,660 over the last couple of days there have been buyers coming back in, and these markets are still bullish despite the late plunge we saw in late U.S. trade yesterday." U.S. stocks fell on Thursday, hitting UK stocks in early trade, after a Federal Reserve official said the central bank could begin to slow its monetary stimulus this summer. It was growth sensitive stocks, however, which led the recovery, with basic materials, energy and financial stocks combining to add 28 points to the index. Helping to lift the mood around these riskier sectors was Lloyds, up 2 percent, taking it through 61.2 pence, which the government regards as breakeven on its 20.5 billion pound ($31.4 billion) rescue of the bank. "Plenty of momentum based investors will have seen the move through 60 pence earlier in the week as a big level... so there's a renewed appetite to be a buyer of Lloyds," Jones said. Helping so-called "cyclical" stocks higher was a rotation out of defensive plays which had outperformed year to date. Goldman Sachs downgraded food and beverages to underweight and personal and household to neutral, and these sectors combined with other defensive plays in utilities and health care to be the biggest weights on the index. "A few brokers have today downgraded the Food & Beverage sector today... The sector is now testing the bottom end of its channel from the start of 2011 - and with the earnings multiple still at 19x 2012 price-to-earnings - there is still more downward reversions to come," Nick Xanders, who heads up European Equity strategy at brokerage BTIG, said in a note. Link this Share this Digg this Email Reprints

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