Defensive shares led the FTSE 100 slightly higher on Friday as investors braced themselves for the latest set of jobs data out of the U.S., while miners lead the fallers as brokers cast doubt over the sustainability of recent gains.
London's blue chip index <.FTSE> was up 2.88 points at 5,798.40 by 0904 GMT.
Traders said there were unlikely to be any drastic index movements until the U.S. nonfarm payrolls are released around 1330 GMT.
Forecasts are for a rise by around 150,000 after a 200,000 increase in December, with the unemployment rate seen static at 8.5 percent.
Unpredictable seasonal adjustments point to a wide range of expectations, but if the figures improve on the 200,000 seen in December, that could be the catalyst for the FTSE 100 to break and hold above 5,800, Jimmy Yates, head of equities at CMC Markets, said.
Less than 150,000 could see the FTSE 100 dip marginally, but there is support for riskier equities at the moment due to the liquidity boost provided by central banks, he said.
Barclays Capital said the short-term rally should continue as financial conditions continue to improve -- driven by the second long term refinancing operation (LTRO) at the end of February, a 50 basis point European Central Bank rate cut in March, renewed euro weakening and tighter peripheral sovereign spreads -- but longer-term risks prevail.
BarCap said it is positioning itself for the longer term by gradually reducing exposure to financials, and it downgraded financial services to market weight, given the recent uninspiring fund flow data.
It upgraded autos to market weight to play the strength of the Chinese consumer.
Banks <.FTNMX8350> were steady on Friday, having risen 15 percent in 2012, compared to a 4 percent gain on the FTSE 100, on the back of the liquidity boost provided by the LTRO, which has reduced default risk.
Investors netted profits in miners <.FTNMX1770>, which rose sharply on Thursday as talks over a potential merger between Xstrata
As money has been ploughed into cheaper riskier assets early in 2012, funds have flowed out of defensives, but with cyclicals waning on Friday the likes of the drugmakers and tobacco firms featured prominently on the upside.
Insurer Admiral Group
This morning's announcement, while not hugely significant, does highlight the continuing support that Admiral enjoys from its re-insurance partners, said Peel Hunt analyst Mark Williamson in a note repeating its buy rating on Admiral.
Telecoms provider BT
(Editing by Hans-Juergen Peters)