November 13, 2012 / 5:26 PM / 5 years ago

UK shares rally on Spanish bailout hopes

* FTSE 100 ends up 0.3 pct after rebound from 2-month
intra-day low
    * Expectation of Spanish bailout request lifts banks
    * Chartists await breakout from 5,700 to 5,950 range

    By Toni Vorobyova
    LONDON, Nov 13 (Reuters) - Britain's FTSE 100 share index
 closed up on Tuesday, recovering from an earlier
two-month low in late trade on renewed hopes that Spain will ask
for a bailout, a move which is seen as an essential step towards
solving the euro zone crisis.
    Spanish bond yields fell and its main bourse
index rallied on the expectations that Spain will make
the formal request for help which is needed to start the
European Central Bank's sovereign bond-buying rescue plan.
However, there seemed to be no fresh news behind the shift in
market sentiment, with traders saying that thin volumes
exaggerated the moves.
    "There is rumour that Spain is getting its bailout," said
Steve Larkins, head of sales trading at Seymour Pierce. "They've
got to do something, Europe has got to sort itself out."
    The FTSE 100 finished up 18.98 points, or 0.3
percent, at 5,786.25, rebounding off a two-month intra-day of
5,710.99 points and climbing back above the key technical
support level of the 200-day moving average around 5,729.19.
    Despite being outside of the euro zone Britain has been hit
hard by the crisis due to close trade ties and UK banks which
have a direct exposure to the euro zone through holdings of
sovereign debt reversed earlier losses, with the sector index
 gaining 1.1 percent.
    Earlier Vodafone had unveiled a 5.9 billion-pound
writedown on the value of its business in Spain and Italy and
lowered its full-year outlook. 
    S hares in the mobile phone operator, the third biggest
company in the FTSE 100, closed down 2 .5 percent i n m ore than
three-ti mes the 90 -day av erage daily volume. 
    "We were looking at some short positions in Vodafone, very
short-term," said Jonathan Roy, sales trader at Prime Markets.
    On the flip side, ITV was the biggest gainer on the
FTSE 100, adding 9 percent after the broadcaster said its net
advertising revenue for the year will outperform the wider
television market. 
    "You had the classic contrast: ITV, which we recommended as
a 'buy' last night, looks very impressive and at the same time
you've got Vodafone breaking down, and that's in a macro
environment which is still very clouded and very troubled, so
stock-specific risk is very high." said Tim Parker, technical
analyst at Westhouse Securities.
    "We have lost momentum in the last couple of months (on the
FTSE 100). We are in a sideways trading range of 5,950 to 5,700
points ... So it's watch and wait at the moment. If we get a
breach of 5,700, then you could argue that there is a series of
lower highs and lower lows that could be the beginning of a new
downtrend and 5,500 would be the target support."

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