* 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
By Alistair Smout
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)