Defensives help FTSE gains as investors cautious

By Tricia Wright

LONDON (BestGrowthStock) – Britain’s top share index closed modestly higher on Friday, aided by strength from defensive stocks on investor concern over the state of the global economy, and countering falls among banks and miners.

The FTSE 100 (.FTSE: ) closed up 9.38 points, or 0.2 percent, at 5,275.44, after rising 0.4 percent on Thursday. Over the course of the week, the index dropped 1.1 percent.

“The phrase ‘the double-dip recession’ is being bandied around pretty much every day at the moment, and I think people therefore are probably moving into (defensive stocks) as a little bit of a cover,” said Mark Priest, senior equities trader at ETX Capital.

Drugmakers, perceived to be among those companies more resilient to economic headwinds, were higher as a sector, with GlaxoSmithKline (GSK.L: ) up 2.4 percent.

Defensive tobacco stocks also notched up good gains. Imperial Tobacco (IMT.L: ) and British American Tobacco (BATS.L: ) added 1.4 percent and 0.9 percent, respectively.

In the United States, retail sales rebounded in July but showed hints of lingering economic softness, as did inflation data showing underlying price pressures stuck at their lowest level since the 1960s.

While there was no UK economic news, elsewhere in Europe, German gross domestic product grew 2.2 percent in the second quarter, while French GDP growth also exceeded forecasts.

As is typical in August, trade in UK equities was thin and market participants saw little prospect of significant moves from current levels until the end of the holiday period.

“We are range-bound between 5,200 and 5,500 and there is not likely to be a break out until trading is back to normal in September,” said Tim Whitehead, investment manager at Redmayne-Bentley.

Banks, whose share prices tend to track investor appetite for risk, were mostly weaker. Standard Chartered (STAN.L: ) was the worst off, shedding 1.7 percent, while HSBC (HSBA.L: ) and Lloyds Banking Group (LLOY.L: ) lost 1.3 percent and 0.6 percent, respectively.

Mining stocks were also out of favor, with Vedanta Resources (VED.L: ) topping the blue-chip fallers’ list, off 5.9 percent, as sources said the company was close to finalizing a deal to buy a majority stake in Cairn Energy’s (CNE.L: ) Indian unit, Cairn India (CAIL.BO: ). Cairn Energy rose 3.4 percent.

Aviva (AV.L: ) was the star British blue-chip performer, jumping 5.5 percent after a report on Sky News that the insurer had rebuffed a 5 billion pound bid from RSA Insurance Group (RSA.L: ), which fell 0.9 percent.

Elsewhere, TUI Travel (TT.L: ) gained 4.5 percent after Goldman Sachs upgraded the stock to “buy” from “neutral” on valuation grounds.

(Editing by Simon Jessop)

Defensives help FTSE gains as investors cautious