LONDON Britain's FTSE 100 share index stalled near the top of its recent range on Thursday, supported by prospects of global central bank stimulus but struggling to break fresh ground ahead of a potentially gloomy earnings season.
The European Central Bank on Thursday reaffirmed its commitment to the euro and its plan to buy bonds to bring down their borrowing costs - pledges that have boosted global equities and helped the UK index add 6.4 percent since late July.
But it offered no fresh catalysts for the market, with no new remedies and no steer on whether Spain will agree to the strict terms necessary to launch the bond purchases, seen as key to resolving the euro zone crisis.
"To the extent that there was always a small chance that they might do something more, ... the overall tone is slightly disappointing," said Derry Pickford, a macro analyst at fund management firm Ashburton.
The FTSE 100 closed flat at 5,827.78 points, shrugging off an expected decision by the Bank of England to leave monetary policy unchanged, but failing to hold on to a one-week intra-day high of 5,854.16 points.
The technical picture for the FTSE remained "reasonably encouraging", according to Barclays strategist Phil Roberts.
"Because we've bounced off the retracement level (of the early to mid-September rally), because October 1 was a reversal day, the signs are that the FTSE has upside potential. It just needs to deliver the next phase, which actually indicates that the market is maybe starting to pay up for equities," he said.
From a fundamental point of view, however, market participants said the index was likely to struggle to break out of the recent ranges without fresh impetus.
"Unless we get a resolution from Spain in terms of whether they are going to go for a quick bailout or not, the market is not going to get (stimulus) out of Europeans, which will continue to weigh on sentiment," said Zeg Choudhry, head of equities trading at Northland Capital Partners.
"(But) I can't imagine that there are too many shorts out there because you are shorting the market against potential (stimulus) out of Europe and QE in the United States, so ... it's easier to make money on the long leg of the market."
The third-quarter earnings season, which kicks off in the United States with aluminium giant Alcoa reporting on Tuesday, could further muddy the outlook.
UK companies are expected to report a 7.2 percent drop in third-quarter earnings versus a year ago, according to Thomson Reuters Starmine data.
"I would assume that, given the economic data we've seen, reflecting slowdown, the figures will reflect that," said Choudhry at Northland Capital Partners.
Underscoring the risks, shares in Tesco fell 3 percent, hit by a string of analyst downgrades a day after it reported its first fall in profits in 20 years.
"It's a realisation that there is no quick fix to Tesco, and therefore there's less positive versus negative momentum in the stock just for now, and there will be for a little while," Clive Black, an analyst at Shore Capital Stockbrokers, said.
(editing by Jane Baird)