Fiscal cliff fears bring end to year's best FTSE rally

LONDON Thu Dec 13, 2012 5:40pm GMT

The outside of the London Stock Exchange building is seen in the City of London, March 7, 2005. EUTERS/Toby Melville

Credit: Reuters

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LONDON (Reuters) - The FTSE 100 leading share index fell on Thursday as concerns over U.S. fiscal negotiations resurfaced, prompting investors to consolidate recent gains made during the longest continuous rally of the year.

The FTSE 100 index was down 16.24 points, or 0.3 percent, at 5,929.61, having closed 0.4 percent higher at a nine-month closing peak on Wednesday following six days of consecutive gains.

The index recovered slightly in afternoon trading from early falls following encouraging unemployment and retail data from the United States.

However, shares fell back towards the intraday trough of 5,918 after U.S. House Speaker John Boehner accused President Barack Obama of being willing to "slow walk" the economy towards fiscal crisis.

The index dropped 0.27 percent in the 12 minutes after his comments.

Federal Reserve Chairman Ben Bernanke had set the tone for the day's trading, warning that monetary policy won't be enough to offset damage if politicians fail to avert the "fiscal cliff" of steep tax hikes and budget cuts which could throw the world's biggest economy into recession.

"Following the mixed figures that we got from the U.S., the FTSE 100 is in consolidation mode at the moment," said Myro Sokou, senior research analyst at Sucden Financial.

"We got quite good weekly jobless claims, while retail sales were fairly in line with expectations. However I think the main focus at the moment is the fiscal cliff discussions," she added, noting that volume on the index was thin.

AstraZeneca was the most heavily traded stock in the index, trading over twice its 90-day daily average volume, while overall FTSE volume was at just 70 percent.

The drug company lost 2.8 percent and took the most points off the index as it said an experimental rheumatoid arthritis drug proved inferior to Abbott Laboratories' Humira in a clinical study, knocking hopes for one of the few late-stage products in the company's pipeline.

In all, the health care sector took 6 points off the index.

"AstraZeneca have had a relatively good run, so I suspect people are using this as an opportunity to take profits," said Savvas Neophytou, analyst at Panmure Gordon.

Profit taking was seen as a theme across the index, with the FTSE expected to resume its upward path heading into the yearend despite the session's losses.

"It is a temporary setback, a couple of days or so," Valerie Gastaldy at technical analysis firm Day By Day said.

"The index should rise again into 2013 first week, at 6050/6100."

Strategists predict that the FTSE 100 will rise to 6,100 by mid-2013 and 6,400 by the end of 2013, with top-end estimates reaching 7,000, according to a Reuters poll released today.

(Editing by Jeremy Gaunt.)

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