Britain's top shares hit a new four-month closing peak in choppy, thin trading on Thursday, led by a further rebound in Standard Chartered, but chart support for further gains in the near term looked weak. Banks, up 0.8 percent, were the best performing sector, led by a 3.6 percent rise in Standard Chartered, bouncing further back from a 16 percent slide on Tuesday after it was alleged to have broken US law in transactions with Iran.
---- Standard Chartered leads gainers in hefty volumes
Volumes in Standard Chartered were 240 percent of its 90-day daily average, against just 87 percent for the FTSE 100 index, which ended 0.1 percent, or 5.59 points, firmer at 5,851.51, its highest close since early April. Charts signalled the market could correct soon, especially as volumes remained thin as a result of the summer holiday season. "The FTSE is going up, but the interest in the market doesn't seem to be picking up with it," Barclays technical analyst Phil Roberts said.
"A correction is overdue, but a shallow one, maybe early next week. However, once you get a correction, provided we stay above 5,730, then it is more likely the FTSE will break the 5,936 trendline resistance." Adding its weight to the move higher was the mining sector, up 0.4 percent after figures showed Chinese inflation fell to a 30-month low, fuelling expectations of further policy easing in the world's second-largest economy at its biggest consumer of raw materials.
"Miners are supported by the Chinese CPI data overnight. It opens the door for more easing, which is going to help them," Knight capital trader David Evans said. "(Miners) have had a good run recently, so you might be seeing a bit of buyer exhaustion," he said, referring to modest gains by the sector, which rose for a fifth straight session on Thursday.
Analysts said Chinese authorities had been quick to implement measures in the past to stop growth slowing, including two rate cuts in one month, and could take more fresh measures. "Many believe we will now see money pumped into the economy in another attempt to limit the effects of the euro zone debt crisis on the economy," James Hughes, chief market analyst at Alpari, said in a note.
The five-day index rally had left some stock valuations looking stretched, Troy AM fund manager Sebastian Lyon said in a note, and with earnings risk slanted to the downside, now was not a good time to buy into the market. He said valuations of companies such as BAT, Diageo and Unilever were stretched.
Among individual movers, AMEC dropped 4.8 percent in brisk trade, with volumes hitting 244 percent of its 90-day daily average, after results. While it upped its dividend and posted a 37 percent rise in revenues, Shore Capital was concerned about its operating margins and downgraded the stock to "hold" from "buy".