* Vodafone extends recent gains
* Oils higher with crude prices
* M&S bounces ahead of Wednesday's trading update
By Jon Hopkins
LONDON, Jan 5 (Reuters) - Britain's leading share index
gained 0.2 percent by midday on Monday, extending last week's
strong run, with Vodafone <VOD.L> in demand, and oils firmer.
By 1153 GMT, the FTSE 100 <> was 9.65 points higher at
4,571.44 after rising 8.2 percent in a four-session winning run
last week. The UK benchmark, however, suffered its worst annual
drop since its launch in 1984 last year, down 31.3 percent.
Index heavyweight Vodafone provided the biggest boost for
the FTSE 100 index, up 4 percent, extending its recent strong
run after Credit Suisse tagged the mobile phone group as a
"trading buy" on New Year's Eve.
"We have started the week in much the same fashion as last
week, but as volumes start to return to the market we will gain
a greater idea of sentiment and confidence," said Joshua
Raymond, Market Strategist at City Index.
"The market is now trading at the same highs it reached at
the beginning of November. However, we need to see the market
trading consistently above 4,600 before we can say that the new
year marks a change in confidence in the market," Raymond added,
Oil stocks also moved higher as crude prices <CLc1> pushed
back above $47 a barrel, lifted by Israel's offensive in the
Gaza Strip and the Russian gas supply row.
BG Group <BG.L>, BP <BP.L>, Cairn Energy <CNE.L>, and Tullow
Oil <TLW.L> added between 1.9 percent and 4.3 percent.
U.S. stock index futures <DJc1> pointed to a slightly lower
open on Wall Street on Monday, as gloomy comments by U.S. and
European policymakers overshadowed hopes that President-elect
Barack Obama's plan for massive tax cuts will help revive
economic growth.
Over the weekend, both Janet Yellen, president of the San
Francisco Federal Reserve Bank, and Lucas Papademos, vice
president of the European Central Bank, highlighted the risks of
deflation -- an economically damaging spiral of falling prices
and demand. [
Obama is seeking as much as $310 billion in tax cuts as part
of a massive stimulus plan to tackle the financial crisis.
[ID:nSP346125]
After a rally last week, banks were weaker, with HSBC
<HSBA.L>, Royal Bank of Scotland <RBS.L>, HBOS <HBOS.L>, Lloyds
TSB <LLOY.L> and Barclays <BARC.L> down 0.5 percent to 5.0
percent.
Deutsche Bank said in a note that it had cut its 2009 EPS
forecasts for Barclays, HSBC, RBS and StanChart by 12 percent to
72 percent.
"We are sellers of Lloyds TSB and see greater risks around
HSBC and RBS of our holds. Barclays is our only buy," it said.
"We see higher than expected loan losses as the key sector
downside risk. Key upside risks relate to a sharp improvement in
sector sentiment driven by a resumption of corporate lending
volumes, likely linked to government assistance."
Retailers were mixed with a spate of Christmas trading
updates due this week.
Marks & Spencer <MKS.L> rallied 3.6 percent higher ahead of
Wednesday's trading update, while mid cap Debenhams <DEB.L>
gained 11.8 percent ahead of its update due Tuesday.
However, Next <NXT.L> lost 0.5 percent, with its update
expected Tuesday, and food retailer Sainsbury <SBRY.L> was down
3.7 percent ahead of trading news Thursday.
"We had a bit of a bounce towards the end of the year. After
all you can argue that we have quite a bit of over-reaction
through parts of last year," said Howard Wheeldon, senior
strategist at BGC Partners. "But none of the euphoria takes away
the issues that we have to face this year."
(Additional reorting by Dominic Lau; Editing by Sharon
Lindores)
