FTSE marches higher

By Simon Falush

LONDON (Reuters) – Gains in commodity stocks helped push Britain’s top share index to its best week since November by close on Friday, but technical factors suggest further gains will be muted in the near future.

Investor attention has shifted away from risks associated with violence and political upheaval across the Arab world and the impact of an earthquake-induced nuclear crisis to prospects for improved company earnings and cheap company valuations.

The FTSE 100 (.FTSE: Quote, Profile, Research) carries a one-year forward price-to-earnings of 9.8 times, a level not seen since September and well below a 10-year average of 14.4, Thomson Reuters Datastream shows.

By comparison, the S&P 500 has a one-year forward P/E of 12.5 times.

The index ended 19.89 points or 0.3 percent higher at 5,900.76, after it rallied 1.5 percent at on Thursday to levels last seen before Japan’s massive earthquake.

The index has gained in six of the last seven weeks and added 3.2 percent on the week, though it is still negative for March.

However chart-watchers said further gains looked set to be limited next week.

“(The index) has retraced 61 percent of the declines of the last four weeks to meet resistance at 5900 (November’s high),” Nicole Elliott, technical analyst at Mizuho Corporate Bank said. “We are mow likely to stall here today and next week.”

Volumes on Friday were low, at just 74 percent of the last 90 trading sessions, signaling a lack of enthusiasm for buying at theses levels.

Other market watchers were also skeptical about whether there was likely to be much more upside for the index next week.

“It is still difficult to come up with a convincing case for a sustained push by the FTSE 100 through 6000 – we could well see sellers moving back in next week and the brakes start to come on,” David Jones, chief market strategist at IG Index said.

ENERGY CORRELATION RETURNS

Energy stocks whose correlation to the oil price last week turned positive after falling sharply on strife in North Africa, gained with robust crude around $116 driving gains.

Royal Dutch Shell (RDSa.L: Quote, Profile, Research) gained 1 percent while BP (BP.L: Quote, Profile, Research) added 0.6 percent, recovering from early weakness after an arbitration panel held up a deal between the British oil major and Rosneft (ROSN.MM: Quote, Profile, Research), Russia’s largest oil firm.

The two companies have been blocked from forming an alliance to explore for oil in the Russian Arctic and executing a $16 billion share swap.

Consumer goods group Reckitt Benckiser (RB.L: Quote, Profile, Research) added 3.1 percent with traders citing an upgrade from Bank of America Merrill Lynch as the catalyst.

Invensys (ISYS.L: Quote, Profile, Research) rebounded 3.5 percent after a sharp fall on Thursday when the engineering firm ousted its chief executive Ulf Henriksson, with analysts saying that the reasoning behind the change had reassured investors.

Sainsbury (SBRY.L: Quote, Profile, Research) added 1.5 percent as Natixis upgraded the food retailer to “neutral” from “reduce.”

Retailers Next (NXT.L: Quote, Profile, Research) and Kingfisher (KGF.L: Quote, Profile, Research) fell 1.2 and 1.8 percent respectively, retreating following sharp gains post results in the previous session.

Autonomy (AUTN.L: Quote, Profile, Research) was the sharpest faller, off 3.4 percent, after JPMorgan cut its full-year 2012 earnings estimate for the software firm, citing deteriorating earnings quality.

(Additional reporting by David Brett; editing by Sophie Walker)

FTSE marches higher