Britain's top shares closed higher on Friday after US consumer data showed the recovery in the world's biggest economy was gaining traction and Royal Bank of Scotland led a sector rally on the back of a broker upgrade. London's FTSE 100 index closed up 24.86 points, or 0.4 percent at 5,965.58, finishing just above the 2012 closing high set on Tuesday, and securing its first weekly gain since the end on February.
However, the index closed below a major resistance level seen at around the 5,989 level and technical analysts said the index needs a convincing pass through that threshold to pave the way on up to 6,100. Upbeat economic data from the US and Wall Street indexes in positive territory, with the S&P 500 holding above the 1,400 level, helped the UK index consolidate the day's gains. While US consumer prices rose the most in 10 months in February as the cost of gasoline spiked, there was little sign that underlying inflation pressures were building up.
"Although the US remains the bright spot we would like to see some more broad-based positive data from outside the US before becoming more bullish on the outlook for global equities and other risk assets," Oliver Wallin, investment director at Octopus Investments, said. "Given that markets have continued to edge upwards this week, on the back of, or perhaps because of, little news, there's been no need to adjust our portfolios to any significant extent," he said.
Big banks were more upbeat, however, as they turned bullish on stocks in relation to other asset classes. Credit Suisse raised targets for key global equity indexes, and said it saw growing risk for bonds. Citigroup was in a bullish mood too, as the US bank said the level of Britain's FTSE 100 index could double over the next 10 years. Meanwhile UBS raised its British GDP estimates for 2012 and 2013, which prompted the Swiss bank to upgrade its rating on Royal Bank of Scotland - up 6.3 percent - to a "buy", saying it was a clear recovery play on Britain and the United States.
"A more positive view on the UK combined with improving economic momentum in the US where growth expectations are already well embedded will pave a way for improved performance in RBS's core business and should contribute to lower losses in the non-core division," the bank said in a note. With analysts and investors gaining confidence that the flood of liquidity provided by the central banks has prevented a meltdown of the financial system, volatility - a crude gauge of investor fear - has fallen.
The prospect of rising markets and lower volatility boosted the investor appetite for asset managers, which haemorrhaged fund flows in 2011 in the face of wildly fluctuating markets, and for interdealer brokers. Hargreaves Lansdown rose 3.9 percent, while ICAP added 4.7 percent. Shire gained 0.8 percent as J.P. Morgan Cazenove upgraded its recommendation on the firm to "overweight" from "neutral" on valuation grounds, helping the drugmaker pare losses made in the previous session.
J.P. Morgan said Shire trades on only 14.2 times 2013 estimated earnings, which look too cheap for a 17 percent 2013-17 earnings per share compound annual growth rate. Elsewhere, Tullow Oil jumped 3.9 percent after the London-listed company said an appraisal well in Ghana had successfully encountered oil in high quality reservoirs. Tullow was the fifth-most heavily traded stock among UK blue chips on Friday, with volume at 116 percent of its 90-day daily average.
Integrated oils, however, were the main fallers and are expected to continue their decline this year as investors bet that an improving economic outlook will favour sectors such as autos and banks more. The biggest faller was Polymetal International, down 3.4 percent, with traders citing vague speculation about a merger with Russian peer Polyus Gold. Elsewhere on the downside the more defensive shares bore the brunt of the selling pressure as investors became less risk averse with United Utilities and National Grid each down 0.9 percent.
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