London Report: Blue chips drop as ex-dividends spark sell off

THE FTSE 100 ended lower yesterday, with losses for companies going ex-dividend offsetting the impact of positive macroeconomic data, which lifted financial stocks.

Kazakh miner ENRC, down 2.7 per cent, was among the top fallers on the FTSE 100 after announcing a steeper-than-expected drop in first-half profit, while global miner Rio Tinto fell 1.8 per cent after going ex-dividend.

Other firms that traded without their latest dividend and featured among the top decliners included AstraZeneca, Anglo American, Pearson, Royal Dutch Shell and Standard Chartered. Their shares fell 1.1 to 1.9 per cent.

Weaker “ex-div” companies derailed a recent broader rally in the market that could otherwise have risen after encouraging economic data, which underpinned cyclicals such as banks and industrials.

The UK banking index rose 0.3 per cent, while Royal Bank of Scotland gained 3.5 per cent.

“The concentration of companies going ex-divs today has taken the shine off the good macroeconomic numbers coming out of the euro zone and the UK today,” James Butterfill, global equity strategist at Coutts, said.

“There is no doubt that both the UK and the euro zone economies are still very fragile, but recent economic numbers have been very encouraging and should support the market going forward. There is a greater investment case for smaller, more domestically-focused businesses rather than big exporters.”

Sentiment towards cyclical stocks improved after data showed stronger growth in Germany and France helped the euro zone to emerge from its longest recession in the second quarter, while a sharp fall in UK jobless benefit claims in July pointed to a strengthening labour market.

The FTSE 100 closed 24.51 points, or 0.4 per cent, lower at 6,587.43, with volumes only 85 per cent of the 90-day daily average as a lot of traders were away from their desks in the traditional summer holiday period.

The FTSE 100 is stuck in the middle of its recent trading range, where support has been seen at about 6,500 and resistance at around 6,680 – something analysts say could play out for the rest of the month.

“It's not easy to see what's going to push the FTSE-100 out of its latest range,” Charles Stanley analyst Bill McNamara said. “Some upside looks possible in the near term, but it's not easy to make a case for buying it up here.”

The market also got support from data showing stronger growth in Germany and France helped the euro zone to emerge from its longest recession in the second quarter, while a sharp fall in UK jobless benefit claims in July pointed to a strengthening labour market.