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FTSE 100 close: London index muted as Barclays and Lloyds Bank give up early gains

Markets were also given a lift by the news that shop price inflation slowed to 2.5 per cent in February, the lowest level seen in two years.
Markets were also given a lift by the news that shop price inflation slowed to 2.5 per cent in February, the lowest level seen in two years.

London’s FTSE 100 was muted today as investors ditched mining giants, curbing the sector’s recent rally, while high street banks gave up strong early gains.

The capital’s premier index edged 0.01 per cent high to 7,899.48 points, while the domestically-focused mid-cap FTSE 250 index, which is more responsive to sentiment toward the UK economy, nipped 0.34 per cent lower to 19.135.87 points.

The City’s biggest listed commodity companies lead losses on the FTSE 100 today, holding back any advances.

Chilean miner Antofagasta was the worst performer, losing just over three per cent, while Rio Tinto and Anglo American weren’t far behind, dropping a little over 1.8 per cent apiece.

Producers of raw materials, which represent a big share of the FTSE 100, have notched strong gains in recent days due to investors betting a resurgence in the Chinese economy will bump up demand for things like coal and copper.

GDP growth in the world’s second largest hit 4.5 per cent in the first three months of this year, above expectations.

Some traders could have booked some profits after this week’s surge in mining shares, while the pound’s strengthening this year may have soured sentiment toward Britain’s commodity producers today.

A weaker pound tends to boost demand for mining giants’ products by making them more competitive and allows them to receive more sterling in exchange for their overseas income.

UK high street banks were the big winners during the opening session in the City, likely because investors have sharply raised their bets on how high the Bank of England will send interest rates.

New numbers from the Office for National Statistics yesterday showed UK inflation topped analysts’ expectations to hang in the double digits in March at 10.1 per cent, prompting traders to price in a five per cent rate peak.

Barclays, HSBC, NatWest and Lloyds Bank all surged to the top of the FTSE 100, adding at least one per cent.

However that rally ran out of steam heading into the afternoon session, pegging back the index’s advances.

A higher interest rate environment tends to boost banks by allowing them to charge more for loans.

The pound strengthened around 0.1 per cent against the US dollar.