By Atul Prakash
LONDON (Reuters) – Britain’s top share index steadied near a 14-year high at the close on Wednesday and remained on track to set a record peak in coming months on growing optimism that the economy is on a fast recovery path.
The benchmark FTSE 100 index ended 0.08 percent higher at 6,878.49 points after touching its highest level since December 1999 earlier in the session.
Analysts said the market was likely to be supported by an improving economic outlook going forward and any price dips could prove to be good buying opportunities.
In a further sign that the UK economy was gathering pace, the unemployment rate fell to its lowest level in more than five years in the first quarter, data showed.
“The FTSE remains underpinned by a strong domestic recovery and foreign bid speculation. Technically it also looks healthy,” Lex van Dam, a hedge fund manager at Hampstead Capital, said.
Traders said the index, which has been helped in recent weeks by a burst of deal-making and bids alongside an improving economy, had the potential to break above the all-time high of 6,950.60 points it set in 1999.
“We see the FTSE breaking 6,900, then moving to 7,000. We are not at the inflection point as yet where equities offer expensive valuations,” Atif Latif, director of trading at Guardian Stockbrokers, said.
According to Thomson Reuters Datastream, the FTSE 100 trades at 13.7 times its 12-month forward earnings, against a 10-year average of 11.7 times.
Sentiment also improved after the Bank of England said it was still in no rush to raise interest rates, but some analysts said it could happen earlier than the market was expecting.
“We maintain our view for the first bank rate hike to come in November 2015,” James Ashley, chief European economist at RBC Capital Markets, said. “We remain comfortable with our projection for tightening to be a H2 (of 2015) story.”
Among individual movers, Compass was up 1.6 percent after the caterer said it would return 1 billion pounds ($ 1.7 billion) to shareholders through a special dividend and raised its interim dividend to 8.8 pence per share.
However, gains in the broader market were capped by a sharp decline in broadcaster ITV, which tumbled 6.2 percent after the company said its channels had not attracted the audiences it wanted in the first four months of the year.
Analysts said ITV’s second-quarter guidance for net advertising revenue was just short of their 14 percent forecast and the broadcaster had to make an effort to get back on the front foot on audience numbers.
Stocks trading ex-dividend, including Royal Dutch Shell, Glencore Xstrata and GlaxoSmithKline, also limited the FTSE 100’s gains.
(Additional reporting by Tricia Wright; Editing by Toby Chopra and Susan Fenton)
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