Range-bound FTSE climbs, Europe gloom hits banks

By David Brett

LONDON (Reuters) – The FTSE 100 rose moderately in light trade on Tuesday with support from miners and upbeat results from Wolseley (WOS.L: Quote, Profile, Research) outpacing falls in banks on European debt worries.

The FTSE 100 (.FTSE: Quote, Profile, Research) climbed 27.68 points, or 0.5 percent, at 5,932.17. The index regained more than 3 percent the previous week following losses sparked by the earthquake in Japan.

“The fact that the FTSE has remained at these levels showing little signs of weakness when there is so much negative news out there shows just how much underlying strength there is in the market,” Angus Campbell, head of sales at Capital Spreads, said.

Trading volumes were 77 percent of the index’s average 90-day volume as investors approached the end of a tumultuous month cautiously, hoping jobs data from the United States on Friday will provide a catalyst for the index’s next move.

“It’s a big data week with the (U.S. non-farm) payrolls on Friday and that could see us get more positive momentum,” Steven Bell, director at the $600 million GLC hedge fund said.

The FTSE remains in a range near its 50-day moving average of around 5,933 and above its 20-day moving average of around 5,791. The index has traded below its 50-day moving average since March 4.

Investors bought into growth stocks as Wolseley, the world’s largest plumbers and builders merchant, gained 2.1 percent after posting a 64 percent rise in half-year trading profit and reinstating its dividend.

Wolseley’s shares trade at a price around 17 times the company’s prospective earnings per share, compared to the sector average of around 12 times according to Thomson Reuters data. Analysts saw more upside potential.

“Wolseley has plenty of recovery potential in terms of both earnings and for further deleveraging of the balance sheet,” Charles Stanley’s analyst Tony Shepard said.

MINERS HIGHER

Miners (.FTNMX1770: Quote, Profile, Research) were firmer after a weak showing on Monday. Vedanta (VED.L: Quote, Profile, Research) was up 2.9 percent with traders citing recent upbeat broker comment surrounding its pending purchase of Cairn India, which they say could be 30 percent earnings accretive.

Hedge fund firm Man Group (EMG.L: Quote, Profile, Research) rose 0.7 percent after it said it expects $700 million of net inflows in the three months to March.

Clothing retailer Next (NXT.L: Quote, Profile, Research) added 1.9 percent, with traders citing a bullish note from Morgan Stanley.

Intercontinental Hotels (IHG.L: Quote, Profile, Research) rebounded 4 percent along with hotel operator Marriott International (MAR.N: Quote, Profile, Research) after the U.S. firm gave a disappointing update on its revenue outlook on Monday.

On the downside, the previous session’s tog gainers the banks (.FTNMX8350: Quote, Profile, Research) were lower after Italy’s UBI Banca (UBI.MI: Quote, Profile, Research) surprised markets by announcing a 1 billion euros ($1.4 billion) capital hike to help repay a government bond.

Analysts said UBI Banca had reignited worries over Europe’s debt crisis and there were concerns other Italian banks could follow suit.

Ratings agency Standard & Poor’s downgraded Greece’s debt deeper into junk status and cut its credit rating on Portugal by one notch.

BP, down 2.2 percent, took 8 points off London’s blue chip index, with traders citing a downgrade to “sell” by Collins Stewart and a media report that the company’s managers may face manslaughter charges following the Gulf of Mexico oil spill.

BP’s shares are 58 percent higher than a trough reached in June last year in the wake of the spill.

Phil Roberts, chief European technical strategist at Barclays Capital, said the fact the FTSE had closed above its 100-day moving average for two consecutive days provided grounds for optimism that it could break through resistance.

“There is potential to move if we manage to close above the two-thirds retracement of the fall from February to March of 5,934 — the same level the market collapsed from — we could move back to 6,052 and the highs for the year around 6,100.”

(Editing by Elaine Hardcastle)

Range-bound FTSE climbs, Europe gloom hits banks