FTSE 100 remains steady despite the political rout and a bit of profit taking
THE FTSE 100 shed 1 per cent, or 33.34 points, to close at 4,405.22 yesterday, weighed down by weak energy and mining stocks, while banks fell as recent bullish sentiment soured.
“Caution is creeping back into financial markets after what was largely a positive week for equities,” said David Evans, market analyst at BetOnMarkets.com.
“There is little by the way of economic announcements today so investors are taking the opportunity to book any gains from last week, while waiting to see which way momentum flows over the coming trading week.”
The index is still up over 25 per cent since slumping to a six-year trough in March, but a return to caution over the economic outlook has led investors to lock in profits.
Prime Minister Gordon Brown came under more pressure after damaging European election results added to his woes after six government ministers quit the government last week.
The political worries saw sterling hit a near two-week low against the dollar, before recovering.
COMMODITIES WEAK
Miners were the main drag on the large caps as commodity prices retreated, impacted by a strengthening dollar, with Anglo American, Vedanta Resources, Fresnillo, Eurasian Natural Resources and Kazakhmys down between 1.8 to 4.9 per cent.
Oil majors also pulled down the index, tracking lower crude prices with Royal Dutch Shell, BG Group, Tullow Oil and Cairn Energy losing between 0.7 to 2.1 per cent. But BP rallied 0.3 per cent after earlier falls.
Lloyds Banking Group was the heaviest individual faller, down 7.7 per cent after rump shares from its placing and open offer were placed at 60p each.
Lloyds said it had raised just under £3.5bn from shareholders, 87 perc ent of which subscribed to a capital raising that will be used to pay back some of the money injected into the bank by the government last year.
Barclays fell 0.4 per cent after it confirmed it is in talks to sell Barclays Global Investors, with US fund manager BlackRock the front runner according to people familiar with the matter.
Other banks were hurt by the slightly cautious sentiment, with Royal Bank of Scotland, HSBC and Standard Chartered down between 0.1 and 4.9 per cent.
NOT ALL DOOM AND GLOOM
Despite the more gloomy mood in the market, further evidence pointed to an improving economic outlook.
Britain’s businesses feel more confident about their prospects than at any other time in the past 12 months, Lloyds Banking Group’s monthly “Business Barometer” found, providing further evidence of improving sentiment in the economy as the slowdown at least bottoms out.
Vodafone, up 0.4 per cent lent the blue chips its strength as defensive factors came more to the fore, with household products firm Reckitt Benckiser adding 1.4 per cent, utility Pennon Group up 0.6 per cent, and food retailer J Sainsbury ahead 0.6 per cent.
BSkyB was also a top FTSE 100 riser, up 2.1 per cent as traders suggested the satellite broadcaster would be the beneficiary of the likely demise of rival Setanta.
The board of the Irish sports broadcaster was due to meet on yesterday, a person familiar with the situation said, following media reports the group was close to going into administration.
Rolls Royce gained 1.9 per cent after Goldman raised its rating to “neutral” from “sell” in a European aerospace and defence review. But peer Cobham shed 3.2 per cent as Goldman cut its rating in the same review.
“The FTSE 100 has been stuck in its current range for around a month now,” said IG Index’s head of sales trading Tim Hughes. “Although the calm may come as a relief to some compared to how the market was lurching around in the first few months of the year, right now all it seems to be doing is encouraging more investors to sit on the sidelines waiting for further clues as to where we are headed next.”
One such clue will be the monthly retail sales data, due today.