FTSE preview: Shares hurt by Libya violence

By Reuters
Updated: 03:09 EDT, 23 February 2011

The FTSE 100 is set to fall again, reversing a late rally yesterday and following US shares lower on fears that the Middle East violence may spread beyond Libya.

Domino effect: Markets fear the unrest in Libya will spread to other oil producers.

The UK blue chip index looks set to shed 28-35 points, or as much as 0.6%, according to financial bookmakers, after it ended down 18.04 points, or 0.3%, at 5,996.76 on Tuesday.

Technical analysts said, however, that investors could be tempted to buy on the dips the risky trading conditions present.

'Although it may appear that (bullish investors) are abandoning the long-side, the current break may be short-lived if (they) decide to re-enter following a correction of the late November to February rally,' James Hyerczyk, an analyst at Autochartist, said.

'If this is the case, then look for potential buyers to begin to show up if the retracement zone at 5,812.48 to 5,743.26 is tested.'

A defiant Muammar Gaddafi said he was ready to die 'a martyr' in Libya, vowing to crush a growing revolt which has seen eastern regions break free of his 41-year rule and brought deadly unrest to the capital.

Oil prices held near a 2-1/2 year high as the Libyan unrest cut supplies from the OPEC nation.

The FTSE 100 volatility index, a barometer of investor anxiety, is up 23.5% this week. The higher the index, the lower investors' appetite for risky assets such as stocks.

Ex-dividend factors will clip 3 points off the FTSE 100 index on Wednesday, with banking firm Barclays and consumer goods maker Reckitt Benckiser losing their payout attractions.

Investors were waiting for the minutes from February's Bank of England Monetary Policy Committee meeting.

The BoE should not allow fears of rising inflation expectations to drive it to an increase in interest rates that could potentially cause deflation, policymaker Adam Posen said.

On the other side of the Atlantic, US January existing home sales data is due.

Lehman Brothers' hurried sale of much of its US operations to Barclays at the height of the financial crisis was fair, and its bankruptcy estate is not entitled to recover an $11bn 'windfall', a federal judge ruled.

The provincial government of Ontario, Canada is to set up an all-party committee to review the London Stock Exchange's planned merger with Canada's TMX, the Daily Mail said.

HMV Group is to close one of its most high profile stores at London's Brent Cross shopping centre, the Daily Mail said.

Minerva, the property developer, is in advanced talks with Spanish bank Santander about leasing its new Walbrook building in the City of London which has been empty for a year, the Guardian said.

Forth Ports' shares rose on Monday as traders noted talk of a possible 1,900p a share bid from private equity for the firm, the Daily Mail's Market Report said.

Merger and acquisitions activity in the global mining sector is expected to accelerate in 2011, fuelled by strong commodity prices and repaired balance sheets, advisory and accountancy firm Ernst & Young said.

There will be results today from Capital Shopping Centres, Rexam, St James's Place, Travis Perkins, Logica, Gartmore, Henderson, Anglo Pacific, RSM Tenon and Galliford Try.