Britain's top shares managed modest gains on Tuesday as solid results from blue chips including drugmaker GlaxoSmithKline and energy firm BG Group more than offset an earnings miss from heavyweight BP. Volume on the FTSE 100 was thin, however, as investors waited for clarity from US debt ceiling talks. The UK benchmark index ended up 4.47 points, or 0.1 percent, at 5,929.73, having traded within a 55-point range.
Gains were capped by data showing anaemic British economic growth and an Italian debt auction which re-ignited investors' worries over the eurozone debt crisis. A glance down the risers' list, however, gave investors plenty to be optimistic about in terms of corporate earnings. BG Group was best off, up 4.3 percent, after posting a 27-percent jump in profits for the second quarter, boosted by higher crude prices.
GlaxoSmithKline advanced 0.7 percent as quarterly profits came in markedly higher than a year ago, when it took a huge legal charge. It prompted Seymour Pierce to repeat its "buy" rating. The broker said Glaxo's drugs pipeline remains one of the best in the industry. Anglo American firmed 1.2 percent, outperforming a weaker mining index, after its 45 percent-owned De Beers, one of the world's largest diamond producers, posted a 55 percent rise in core first-half earnings.
BP, however, fell 2.6 percent after its underlying results fell short of analysts' forecasts and as it benefited less than rivals are expected to from a 50 percent rise in crude prices from the same period in 2010. Its shares contributed nearly 9 points to the downside. Traders said the FTSE 100 is likely to put in future lacklustre showings as long as President Barack Obama's Democrats, and Republican rivals, are deadlocked over competing plans to raise the debt ceiling.
"The FTSE is pretty quiet today as we are waiting for the US government to find a solution to the debt limit problem," said Lex van Dam, hedge fund manager at Hampstead Capital, which has about $500 million of assets under management. "If that gets resolved I expect the market to have a relief rally. If it doesn't get resolved ... well, I'd rather not think about that."
The general market expectation, however, is for a last-minute solution before August 2, when the US government has said it will no longer be in a position to pay all of its bills. "Investors should probably use this as an opportunity to take advantage of weaker prices and cheap valuations to buy into long-term equities," Henk Potts, market strategist at Barclays Wealth, said.
"The overwhelming likelihood is a compromise deal will be done and a good deal of nervousness will start to disappear." Vodafone took second spot on the blue chip leaderboard, up 1.8 percent, after RadioShack Corp chose Verizon Wireless, the British firm's US joint venture with Verizon Communications , as its partner.