Insurers boost FTSE in short-covering rebound

Britain's blue chip index staged a modest rebound in thin volumes on Thursday, with battered insurers and oil stocks boosted by some short-covering ahead of Friday's futures and options expiries. Life insures regained most of the ground lost the previous day, rising 2.9 percent, with Old Mutual jumping 11.4 percent on hopes the planned $3.2 billion sale of its Nordic business would help the group cut its debt and boost shareholder returns.
"All the money that's coming in is on the short side," said Joe Rundle, head of trading at ETX Capital. "Tomorrow is going to be the only day of real volumes in the market, and that's driving people to close their positions." With the situation in the eurozone still hanging in the balance, investors are wary of keeping their positions open over the Christmas period, when wafer-thin volumes would make it difficult to switch in or out of trades if there are market-moving developments on the other side of the Channel.
The FTSE 100 ended up 34.05 points, or 0.6 percent, at 5,400.85, a shade below the 50 percent retracement of the October-November move that it crossed in intra-day trade. The market, which traded at 85 percent of its 90-day volume average, had extended gains in the afternoon as strong economic data from the United States suggested that the world's largest economy is improving and might drive corporate earnings growth on this side of the Atlantic.
US weekly claims for jobless benefits fell to a 3-1/2-year low, and factory activity in much of the country's Northeast picked up this month, data showed on Thursday. However, the rally was short lived, with market players saying they were reluctant to move back into equities until there is some visibility on Europe's progress in resolving its sovereign debt crisis.
"The more investors are looking at what happened at the summit last week, the more disappointed they're becoming," said Richard Hunter, head of equities at Hargreaves Lansdown. "The temptation for investors to come back into the market before the year end now is really going to have to be a big one."