Banks boost FTSE as commods, technicals cap gains

By David Brett

LONDON (Reuters) – Bullish broker comment helped push the banking sector higher on Monday, as Britain’s top share index neared key technical resistance levels after its recent rally, with commodity stocks weighing on the upside.

The FTSE 100 closed 3.73 points, or 0.1 percent, higher at 5,904.49, near its 50-day moving average of 5,933.83. The index has traded below its 50-day moving average since March 4.

London’s blue chip index gained 3.2 percent over the course of last week, its best weekly performance since early November.

“Investors will want to see these levels maintained for a while before pushing on,” Jimmy Yates, head of equities at CMC Markets said.

Barclays Capital named HSBC, Standard Chartered and potentially Royal Bank of Scotland, up 0.6 to 0.8 percent, among the cheapest names in the banking sector.

The broker said it has looked at 11 of Europe’s largest banks and all are trading at a discount to sum-of-their-parts valuations, calculating that around 150 billion euros are missing from their market caps, although it adds the banks usually trade at a discount.

JPMorgan, meanwhile, reiterated its “overweight” stance on banks.

FINANCIAL GAINS FRAGILE

Stefan Angele, Head of Investment Management, Swiss & Global Asset Management, which has around 80 billion swiss francs of funds under management, said the contrarian outperformance experienced by financials in the early part of 2011 may not last as investors re-focus on growth.

“I can see that over the first few months of the year we can have a rally of the lagging stocks (in 2010), but overall I still believe the pro-growth cyclical sectors will outperform these recovery rallies.”

Angele, said he liked the IT sector as well as energy and materials, which will benefit most from the global economic recovery and the business cycle.

He said those sectors will also be supported by the outperformance in terms of growth in the United States and the emerging market regaining momentum with China avoiding a “hard landing.

Angele said he avoided utilities, telecoms and financials, sectors exposed to consumer staples.

Arm Holdings rose 2.5 percent, with traders citing technical factors helping support the chip designer’s stock as it broke through its 20-day moving average but hovered just below its 50-day moving average.

Elsewhere, Burberry was among the top blue-chip performers, 2.8 percent ahead, after Saudi-based retailer Fawaz Abdulaziz Alhokair Co said it had agreed to set up a joint venture with the British luxury goods group to market and sell its products.

On the downside, energy and mining stocks sagged with commodity prices.

Copper fell with broker Ambrian saying investors were worried that China could go through the second quarter still basically living off domestic stocks.

Kazakh-focused miner Kazakhmys fell 1.5 percent with results due in the next session.

Man Group shed 2.2 percent ahead of its update on Tuesday.

Cairn Energy, however, rose 1.7 percent as UBS upgraded the stock to “buy,” and India’s oil minister S. Jaipal Reddy raised hopes its long-delayed transaction with Vedanta for Cairn India may go through by the companies’ target date of April 15.

The FTSE 100 is almost flat on the year, rebounding after some of the gains seen in February were erased by worries over the euro zone debt crisis, political turmoil in the Arab world and the aftermath of the earthquake in Japan.

The UK blue chip index carries a 12-month forward price-to-earnings ratio of 9.8 times, slightly cheaper than the broader STOXX Europe 600’s 10.2 times, Thomson Reuters Datastream showed, though FTSE 100 companies are expected to post an average 19.9-percent rise in earnings this year, compared with a 14.7 percent gain for STOXX Europe 600 companies.

(Additional reporting by Dominic Lau and Tricia Wright; Editing by David Cowell)

Banks boost FTSE as commods, technicals cap gains