THE LONDON REPORT
WEAKNESS in miners and banks sent the FTSE 100 0.2 per cent lower yesterday, retreating from the 2009 of the previous session. The index closed 11.09 points lower at 4,671.37, after ending at 4,682.46 on Monday.
“When you’ve had such a strong run since March and after such a strong July, you can’t expect to keep cracking on,” said David Buik, senior partner at BGC. “It’s healthy to have a pull-back.”
Banks were broadly lower as sentiment on the sector cooled after Standard Chartered announced a surprise £1bn equity fundraising, though it posted a better than expected 10 per cent increase in its first-half profit. The bank fell 7.5 per cent, the heaviest large-cap faller,
HSBC lost 1.1 per cent as investors booked profits after strong gains following results on Monday. But Barclays rose 2.2 per cent to 329.2p as Deutsche Bank upped its share price target to 400p from 369p in reaction to the bank’s results the previous day.
Ahead of results due later in the week, Royal Bank of Scotland added 0.5 percent, while Lloyds Banking Group fell 1.2 per cent.
The index pared losses after data showed US home sales rise at a faster than expected pace in June, but volumes traded were thin, with just 80 percent of the average of the last 90 trading days transacted.
“I expect the market to bounce around like a cork in a bath until October but it should rise towards the end of the year as long as third quarter earnings don’t disappoint,” Buik said.
Mining stocks were in retreat, tracking a pullback in metal prices after Monday’s rally. Rio Tinto, BHP Billiton, Antofagasta and Kazakhmys shed between 1.5 and 4.4 per cent.
Xstrata dropped 2.1 per cent as the Anglo-Swiss miner warned hopes of a quick recovery may be premature after its first-half profit dropped sharply and as it rebuffed calls by shareholders of proposed merger partner Anglo American to pay a premium.
Anglo American shares were 2.6 per cent weaker.
Insurers were also lower. Legal & General was the heaviest faller, down 6.7 per cent, after it halved its interim dividend to conserve cash.
Selected defensives were supported as risk appetite ebbed and flowed. British American Tobacco rose 1.4 per cent while Imperial Tobacco added 1.8 per cent.
Energy companies were the main support for the index, recovering from early losses after crude edged back into positive territory. Royal Dutch Shell, BG Group, Tullow Oil and Cairn Energy added between 0.3 and 2.6 per cent.
On the economic front, a survey showed yesterday that the rate of decline in the construction sector eased to its slowest in 16 months in July and the Bank of England’s monthly two-day rate-setting meeting begins today.