Banks drop but FTSE treads water ahead of Fed decision
BRITAIN’S top share index closed marginally lower yesterday, as weakness in banks offset gains in defensive stocks with investors jostling positions ahead of a US interest rate decision.
London’s blue chip index bobbed around but closed down 2.32 points at 5,772.99, as cautious investors awaited the Federal Reserve’s assessment of the economy and any plans for dealing with renewed weakness.
Traders said there was hope that the Fed might hint at the introduction of some form of QE3 but expected interest rates to remain unchanged as the US economic recovery appears to be losing steam.
“Investors are looking for action but they might be disappointed,” said Jimmy Yates, head of equities at CMC Markets.
In the UK, some members of the Bank of England’s Monetary Policy Committee raised the possibility of future quantitative easing, as it judged the growth outlook had weakened, minutes to its June meeting showed.
British banks fell, having been among the top gainers in trading earlier in the week ahead of the confidence vote in the Greek parliament, with Barclays shedding 2.6 per cent. Lloyds Banking Group and Royal Bank of Scotland both edged down 0.7 per cent, while HSBC lost 0.6 per cent.
Having won the vote of confidence, Greece now faces the task of passing an austerity plan to secure a new bailout from the European Union and IMF, with no further newsflow about that due until next week.
Severn Trent and United Utilities fell as they traded without their payout attractions, along with Game Group, which shed almost 13 per cent to compound sales woes earlier in the month.
Cautious investors tucked into defensive stocks such as British American Tobacco and drugmaker GlaxoSmithKline up 0.8 and 0.5 per cent respectively.
Precious metals miner Randgold Resources was up three per cent as gold neared two-month highs.
Investors turned to the metal’s safe haven qualities in the face of uncertainty over Greece and on expectations that government’s around the globe will continue their loose monetary policy.
Elsewhere, hedge fund manager Man Group rose 4.9 per cent, extending gains in the previous session on the back of a revival of vague takeover rumours, with a welter of positive broker comment supporting the stock.
Credit Suisse upgraded its rating for Man to “outperform” from “neutral”, while Goldman Sachs initiated coverage of the stock with a “buy” rating and 310 pence target price.
Mid-cap fund manager Henderson also benefited from an upgrade to “buy” by Citigroup, taking on 0.2 per cent.
Real estate stocks were higher, with British Land and Hammerson adding 1.4 per cent and 0.2 per cent respectively, as Espirito Santo initiated coverage on both with “buy” ratings.
High street retailer Dixons was also among the risers, gaining 7.6 per cent ahead of its results today.
Small cap explorer Hardy Oil shot up 15 per cent, the biggest riser in the FTSE index, after announcing an oil find in its joint project off the Indian coast.