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FTSE lower on metals weakness

Friday, October 19 09:55:51

Britain's top share index slipped back today after four days of gains, tracking overnight falls on Wall Street and in Asia and weighed down by weakness in mining stocks. Trading was expected to be volatile, however, with the expiry of monthly futures and options contracts which often jolt markets due in London at around 0915 GMT. Miners fell back in tandem with lower copper prices as concerns over demand from top metals consumer China returned after some more positive recent data.

China's Commerce Ministry said today September trade numbers, which showed a surge in exports at twice the rate expected and a return to import growth, are not yet enough to confirm that a recovery is in place for the external sector. At 0804 GMT, the FTSE 100 index was down 6.17 points, or 0.1 percent at 5,910.88, having added 0.1 percent on Thursday to hit a seven-month closing high, with the index ahead over 2.1 percent in the four-sessions up to today.

"Recent strength has led many in the market to assume that a run up to, and through, 6,000 in now simply a formality in the near term, but the fact that it has entered a zone where so much resistance has been encountered over the last twelve months means that such a burst to the upside might not be quite so straightforward," Charles Stanley technical analyst Bill McNamara said. "Uptrend support is now at 5,790 or so and it is not inconceivable that it could come back into play before too long." Temporary power provider Aggreko and packaging firm Bunzl were the two top individual blue chip fallers, down 6.8 percent and 3.4 percent respectively, after the two posted mixed trading updates. Volumes for both were strong, with Aggreko at 273 percent of its 90-day daily average, and Bunzl at 109 percent.

Overall trading volume for the FTSE 100 index was 11 percent of the 90-day daily average. As investors shunned stocks perceived as riskier, defensives - those shares seen as less exposed to the vagaries of the economic cycle - were back in favour, with drugmakers, drinks, and food producers all advancing.

"Long term we are bullish on the outlook for equities and see the next correction as an opportune time to add to longs ... Saying that, however, we remain buyers of defensive names and are decreasing risk on low volume rallies and anticipate a cheaper entry point," said Atif Latif, director of trading at Guardian Stockbrokers. Strategists at Shore Capital also favour defensive stocks to cyclicals. "We remain defensively orientated in sector positioning supported we believe by valuations as well as the economic cycle," Shore Cap equity strategist, Gerard Lane said in a note. ( C) Reuters