LONDON (Reuters) - Top shares eased modestly on Friday as weakness in the energy sector, following cautious broker comment, countered gains by the miners after strong manufacturing data from China.
Such a balancing act mirrored investors desire to remain neutrally positioned ahead of the weekend, and the final full trading week of 2012, although some commentators felt a positive outlook remained for the new year.
“Growth expectations for 2013, though low, have stabilised and central banks worldwide have emphasised their commitment to helping economies overcome the debt headwinds that have threatened to derail economic growth,” Andrew Bell, Chief Executive of Witan Investment Trust said.
“This has created a more positive bias in investors’ attitudes towards equities, especially given their low valuations relative to their traditional relationship with yields on deposits and government bonds,” Bell added.
The FTSE 100 index closed down 7.85 points, or 0.1 percent at 5,921.76, having seen a run of six days of continuous gains snapped on Thursday, with the index up under 0.1 percent over the week.
Falls by the integrated oils knocked around 4 points off the FTSE 100 index, with traders citing the impact of a Barclays Capital note cutting forecasts and target prices across the European sector.
“The stark reality of the last five years is that the European integrated companies have fallen very short of their production goals … As a result, we have cut all of our volume forecasts, stepping well away from company guidance. The average cut is 6 percent in 2016, leaving volumes 11 percent below guidance for those companies that provide it,” Barclays said.
Negative broker comment also weighed on some in the mining sector, with Anglo American down 1.6 percent as UBS downgraded its rating to “neutral” from “buy”.
But overall miners provided the main counter balance to the weak energy sector, adding over 3.5 points to the UK blue chip index, on hopes for increased demand following positive PMI data from China, the world’s biggest consumer of metals.
China’s HSBC flash purchasing managers’ index for December, by contrast, hit a 14-month high thanks to a fifth straight monthly gain.
The sector demand picture also benefited from benign U.S. inflation data, showing headline CPI falling in November for the first time in six months, which relieved pressure on the world’s biggest economy.
U.S. blue chips initially found gains after the CPI data but soon fell back and were down 0.2 percent by London’s close with the main focus on a lack of progress by politicians in ongoing U.S. budget negotiations.
President Barack Obama and House of Representatives Speaker John Boehner held a “frank” meeting Thursday to try to break an impasse in negotiations over the “fiscal cliff,” tax hikes and spending cuts set to kick in early in 2013 which could push the world’s biggest economy in to recession.
“There is always the potential for a short term wobble - particularly given the track record of U.S. policymakers - driven by actions (or lack of) around the fiscal cliff. For us any such wobble, or testing of investor nerves, is likely to signal a buying opportunity for risk assets rather than a flight to safe havens. So, we are more positive and are looking out for the opportunities to maximise the bang for our buck,” Oliver Wallin, Investment Director at Octopus Investments said.
Reporting by Jon Hopkins; Editing by Toby Chopra