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* FTSE 100 hits new high of 7,205.21
* Index comes off highs, up 0.3 percent
* Strong PMIs send sterling up
* IHG, Next go opposite directions after broker changes
By Alistair Smout
LONDON, Jan 3 Britain's top share index rose to
a record high on Tuesday, extending an end-of-year rally into
2017, led by InterContinental Hotels.
Britain's FTSE 100 was up 22.50 points, or 0.3 percent, at
7,165.33 by 1012 GMT, as the London Stock Exchange re-opened
after a long weekend.
It set a high of 7,205.21 in early deals, rising above the
peak it reached at the end of 2016, built on a 5.3 percent rally
in December, its strongest monthly performance since July 2013.
It ended 2016 up 14.4 percent for the year, outperforming
major European bourses.
Weakness in sterling after Britain voted to leave the
European Union has helped to support British stocks, especially
those with international exposure in dollars. Mining stocks rose
by more than 100 percent in 2016, while banks posted an
impressive recovery in the second half of the year.
Growth-sensitive stocks such as banks and miners gained
again on Tuesday, with some attributing optimism in early deals
to strong PMI data out of China.
"The China data is key, and we've seen a sustained period of
good numbers, so that is quite a big deal," said James Hughes,
chief market analyst at GKFX, who added that the recent rally
could nevertheless be overdone.
"We've had a very strong movement in the FTSE 100... but
when you rally this strongly, I worry that when it turns around,
the downward move could be quite aggressive."
Top riser was InterContinental Hotels, up 3.1
percent after an upgrade to "overweight" from "equal-weight"
from Barclays, lifting the stock to an all-time high.
Barclays is a top-rated broker on the stock, and said that
IHG was the best play in the leisure sector on a possible
rebound in U.S. growth.
The index fell back from highs as sterling rose following
data that showed UK manufacturing growth unexpectedly hit a
Top faller was retailer Next, which suffered from a
downgrade by Deutsche Bank to "hold" from "buy".
Next fell more than 30 percent in 2016, but the analysts
said that even with this fall, the stock did not look especially
"The sector has already de-rated, mainly on the changed
demand and currency outlook due to Brexit, and valuations are
typically at historical average levels - cheap but in some cases
not cheap enough," analysts at Deutsche Bank said in a note.
"Reflecting our caution on apparel and impact of channel
shift we downgrade Next to Hold."
(Reporting by Alistair Smout; Editing by Andrew Heavens)