Banks drag down the FTSE as miners and energy drop
BRITAIN’S top shares closed 1.1 per cent lower yesterday, as weakness in banks outweighed strength in defensive issues, while sentiment was dampened by falls on Wall Street after disappointing corporate earnings.
The benchmark FTSE 100 closed 56.02 points lower at 5,154.15, slipping below the 5,200 level which it hit for the first time in more than 12 months on Monday.
A missed sales forecast by healthcare firm Johnson & Johnson cooled the mood on Wall Street.
“The FTSE is taking its lead from the US. The reporting season is going to be an important one because the market will be looking at not just companies’ bottom lines but also the top line to see whether the recovery may be sustainable,” said Mike Lenhoff, chief strategist at Brewin Dolphin.
Banks were the biggest drag on the index, pressured by prominent US banking analyst Meredith Whitney’s decision to cut Goldman Sachs to “neutral” from “buy”.
Barclays, Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered were off 0.3 to 2.9 per cent.
HSBC was also down 1.9 per cent after its Saudi affiliate SABB 1060.SE reported a worse-than-expected 19.8 per cent fall in third-quarter net profit, hit by an increase in the scale of its provisions for bad debts.
US banks JP Morgan Chase, Citigroup, Goldman Sachs and Bank of America are all scheduled to release third-quarter results later this week.
Energy shares reversed gains from earlier in the session, with BG Group, BP, Royal Dutch Shell and Tullow Oil down 0.3 to 2 per cent.
Miners were lower as metals prices retreated across the board. Anglo American, BHP Billiton, Rio Tinto, Vedanta Resources and Xstrata shed 0.2 to 1.7 per cent.
Bucking the trend, Kazakhmys gained 0.4 per cent. The company announced it was in negotiations over a potential $2bn (£1.4bn) loan facility to help fund major growth projects.
Lonmin and Fresnillo were up 1.9 and 1.1 per cent.
Food retailers were also on the backfoot, with Tesco, WM Morrisson and J Sainsbury shedding 1.4 to 1.7 per cent. Marks & Spencer was the top loser, down 4.3 per cent. The company earlier unveiled plans to upgrade its supply chain and boost its presence online and abroad. Tobacco and beverages were among the stronger sectors as investors turned to defensive stocks.