* FTSE 100 rises 0.7 percent
* HSBC, RSA benefit from analyst upgrades
* Financials set to benefit if Fed continues easing
* Charts point to possible “head and shoulders” pattern
By Alistair Smout
LONDON, June 18 (Reuters) - Britain’s top share index rose on Tuesday, aided by broker upgrades for some of its financial heavyweights in cautious trade ahead of a meeting of the U.S. Federal Reserve.
The FTSE 100 was up 46.26 points, or 0.7 percent, at 6,376.75 by 1024 GMT, with financials, which include banks, asset managers and insurers, contributing 24 points to the advance.
HSBC rose 2.2 percent, alone accounting for 10.8 points of gains, as the FTSE 100’s second biggest company was raised to “buy” from “neutral” by Citigroup.
Insurer RSA also benefitted from broker coverage, gaining 2.5 percent after being raised to “outperform” from “neutral” by Credit Suisse.
Financials stand to be among the main beneficiaries from any continuation of monetary easing from the Fed’s latest policy announcement on Wednesday. They have lost more than 10 percent in less than a month as investors shifted to price in a trimming of the Fed’s bond-buying later this year.
Some traders say those concerns have been overdone.
“The market is expecting the Fed to be quite supportive, and say that they’re going to be there for at least the near future.” Joe Rundle, head of trading at ETX Capital, said.
“I think it is going to be pretty volatile however, hanging on the words of Fed officials. The market wants to go higher but investors are still nervous.”
Volumes on the FTSE 100 were light, with just a quarter of the average 90 day volume traded at the end of the morning session, which is usually the busiest.
Rundle added that many investors may look to use the pullback from May’s 13-year highs to get back into the market, having missed the initial rally that saw the FTSE add 15 percent in the first 5 months of the year.
Fawad Razaqzada, technical analyst at GFT, saw the potential for selling pressure at 6,550 due to the “head and shoulder” pattern around the May high, where a market rally fails to break through to new highs, generating more downwards momentum.
“Unless we hear something surprising on Wednesday [from the Fed], the FTSE looks set to reach 6,550 where it may come under some pressure,” he said.