FTSE 100 pauses near nine-month highs

LONDON Thu Dec 20, 2012 5:16pm GMT

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LONDON (Reuters) - The FTSE 100 steadied around nine-month highs on Thursday, pausing within reach of the psychologically key 6,000 points mark.

Investors were discouraged from pushing the market too much higher by the lack of progress by U.S. politicians on a deal to avoid a 'fiscal cliff' of planned tax hikes and spending cuts that threatens the health of the world's biggest economy in 2013.

But many market players expect a compromise will be found which, combined with traditional seasonal inflows from investors taking the final chance to boost annual profits, could give the stock market a fresh leg-up in coming sessions.

The FTSE 100, which is up 1.7 percent so far this month, has posted gains for the past nine Decembers.

"People are pretty much resigned to the fact that even if this fiscal cliff agreement doesn't happen by the end of the year, it will certainly happen by the end of January, but that optimism is waning slightly," said Zeg Choudhry, head of equities trading at Northland Capital Partners.

The UK blue chip index closed down 0.05 percent or 3.3 points at 5,958.34, in sight of the 5,977.82 nine-month intraday high set the previous session.

Friday's expiry of December options could well galvanise the market into trying the 6,000 level - last seen in July 2011 - given the concentration of bets around that level.

Open interest on the Liffe exchange as of December 18 showed some 30,713 call bets at the 6,000 mark - the heaviest concentration of any of the December strikes and suggesting many could be interested in seeing that level breached before expiry in order to cash in.

"We may well see 6,000 in front of the expiry tomorrow morning," Choudhry said. "And if it doesn't happen tomorrow we may well get there next week."

From a technical view point, the FTSE still faces a few hurdles en route to 6,000, namely the 2012 closing high of 5,965.58 - which it has tested in the past two sessions - and this year's intraday peak of 5,989.07, both set in March.

"With each and every setback ending at higher levels than the preceding ones the market keeps the upward pressure intact," technical strategists at SEB said in a note.

Low volumes added to the jittery trading, taking some conviction out of the rally. Average daily volumes traded on the FTSE so far this month are down by a third compared to the same period last year, according to Reuters calculations.

Engineer Weir Group added 2.8 percent as investors cheered its acquisition of U.S. oil equipment firm Mathena as it looks to increase exposure to the rapidly growing shale oil and gas markets.

UBS said the acquisition could boost Weir's earnings by about 5 percent, and potentially more. "The deal looks very attractive if Weir have timed their purchase right," UBS analysts said in a note.

On the down side, shares in Carnival dropped 6.1 percent in afternoon trade, after it sounded a cautious note on its 2013 outlook. The world's largest cruise operator said advance bookings for 2013 continued to be below the prior year levels, at slightly lower prices.

(Reporting by Toni Vorobyova; Editing by Ruth Pitchford)

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