Britain's top shares rose for the fourth straight day on Thursday to their highest level this month as Wall Street extended its end of year rally and this week's retreat by oil prices soothed concern about the impact of high costs on British Airways and other big fuel users. But BAE Systems dipped 0.9 percent after its joint house broker ABN Amro trimmed its earnings forecasts on Europe's biggest defence firm for the next 2 years.
ABN cut its 2005 earnings per share forecast for BAE to 20 pence from 22p and cut its 2006 earnings forecast as it tweaked outlooks in several areas, including an expectation of higher research and development costs for Airbus in 2006 due to the start of work on the new wide body jet A350 and some cost overrun on the double-decker A380.
The FTSE-100 share index closed up 10.3 points at 4,787.7 points, after touching 4,789, its highest level since late-November and only 34 points shy of this year's peak.
The index has climbed 2 percent this week, inspired by a strong showing on Wall Street and a fall in oil prices. British Airways was one of the day's best risers, adding 1.6 percent, while telecoms, media and oil stocks also nudged ahead.
Turnover was slim at 1.6 billion shares, however, as investors wind down for the Christmas holiday. The UK market closes at 1230 GMT on Friday and does not reopen until Wednesday.
Dealers and analysts said markets appear set to end the year on a bright note after 12 months when high oil prices, a fall in the US dollar, rising interest rates and doubts about the global economic recovery have made gains hard going. They said strong US corporate earnings early next year could inspire a rally on both sides of the Atlantic.
"Valuations for UK equities remain favourable," said Mike Lenhoff, strategist at private client stockbroker Brewin Dolphin, adding that positive newsflow, corporate activity and buybacks should lend further support.
"We expect the FTSE 100 to trade up into the 5,000 to 5,250 area before the spring and then to settle into a sideways trading pattern very similar to that experienced for much of this year," Lenhoff added.
Enterprise Inns topped the FTSE leader-board with a 2.7 percent rise to a new record high of 775 pence. Shares in Britain's biggest pubs operator have leapt over 40 percent in the last four months, accelerating on the back of a jump in profits, bumper cashflow raising hopes it will return cash to shareholders, and a UK government inquiry into the pubs industry saying there were no competition issues.
Mobile operator mmO2 - the fourth best blue chip performer so far this year - rose 1.2 percent after Dresdner Kleinwort Wasserstein said mmO2 was likely to extend its revival in Germany into 2005.
But retailers remained on the back foot on worries that spending has been sluggish in the run up to Christmas. Marks & Spencer and Tesco both dipped, even though dealers said there were signs of a pick-up in spending in recent days and Tesco, in particular, is expected to fare well.
A bad year for drug makers also continued, with AstraZeneca slipping 0.4 percent after US regulators said a newspaper advertisement for its cholesterol drug Crestor was misleading regarding patient safety and should no longer be published. A series of product setbacks have wiped almost a third off of AstraZeneca's value.
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