Earnings signs stall Britain's FTSE at 4-1/2 year highs

* FTSE 100 opens flat

* Imperial Tobacco weighs after pessmismistic trading update

* Petrofac falls after Saipem's update sees shares fail to

open

* Equity still favoured by investors as majority of stocks

gain

LONDON, Jan 30 (Reuters) - Britain's blue-chip index stalled

around 4-1/2 year highs in early trade on Wednesday, with

negative earnings guidance issued by several companies weighing

on an already technically 'overbought' index.

An almost 5 percent dive for Imperial Tobacco alone

knocked 4 points off the FTSE 100 and taking it briefly

into negative territory, after the firm said that it expects

first-half operating profit to fall due to increased competition

from the black market.

Petrofac led the list of fallers in percentage

terms, losing 7 percent, with traders citing a negative

readacross from Italian firm Saipem, whose shares

failed to make a price in opening trade after slashing guidance

for 2013.

That all ate into an optimistic run on the market since the

start of this year, but by 0935 GMT, the index was still 10

points higher at 6,349.08.

"People have a big appetite for equities right now, but I'm

still fairly cautious," said Nick Xanders, head of European

equity strategy at brokerage BTIG.

"Imperial is a expensive defensive that didn't meet

expectations, and the oil sector is being dragged down by

collateral damage from the whole Saipem situation.

"So you've got a lot of people who are well and truly

involved in the market who are getting a bit twitchy."

The FTSE 100 has rallied for five consecutive days, gaining

2.6 percent overall and pushing its 14 day relative strength

index (RSI) above 90 for the first time since May 1997. A level

over 70 indicates that an asset is 'overbought'.

"With bonds in clear retreat it would appear that investors

are moving into equities as the asset class of choice and most

sentiment indicators are now extremely bullish," Bill McNamara,

technical analyst at Charles Stanley, said in a note.

"The next upside target is 6,376 or so and that might still

be hit in the near term, but the argument in favour of an

imminent corrective phase is becoming irresistible."

While the big movers of the day were all fallers, the

majority of stocks managed gains - a sign that the underlying

bullishness has yet to run out of steam.

WPP was the only blue chip to gain over 2 percent,

following an upgrade from Jefferies to 'Buy' from 'Hold'.

"The shift to a lower risk, bolt-on strategy frees up cash

for higher dividends and lowers integration risks," analysts at

Jefferies say in a note.

"We see the risk-reward attractively balanced."

(Editing by Patrick Graham)

Source: http://news.yahoo.com/earnings-signs-stall-britains-ftse-4-1-2-095048219--business.html

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