Banks pull FTSE 100 down while resources make gains

THE FTSE 100 share index fell slightly yesterday as disappointing results from HSBC and Associated British Foods outweighed strength from miners on optimism about the global economy.

The blue-chip index ended 7.19 points, or 0.1 per cent lower, at 5,994.01, after it closed 1.4 per cent higher on Friday at 6,001.20, bouncing back after five straight days of declines. The index gained 2.2 per cent in February after a 0.6 per cent fall in January.

Activity was relatively strong with 117 per cent of the average volume of the last 90 trading days volume transacted.

Miners gained ground as riskier assets were lifted after James Bullard, president of the St Louis Federal Reserve, said the US economy should do well in 2011 and that oil prices are not currently a drag on the recovery.

“It seems as if markets are wanting to move on [after the jitters caused by turmoil in Libya] and that there is plenty of inflow into equities as we move into a new month,” said Steven Bell, director at hedge fund GLC.

Vedanta Resources rose 2.1 per cent, while Antofagasta gained 0.7 per cen and Fresnillo put on 1.1 per cent.

African Barrick Gold bucked the trend, falling 1.95 per cent.

Back in positive territory, Essar Energy rose 3.5 per cent, the top gainer, as Credit Suisse initiated coverage of the Indian-focused oil and gas business with an “overweight” rating.

Credit Suisse says Essar has a strong growth outlook, offering investors an attractive play on the Indian power market.

British equities underperformed those in continental Europe and the United States which were firmly higher, as weak results from index heavyweight HSBC and Associated British Foods weighed on sentiment.

Banks were the biggest drag on London's blue chip index, with heavyweight HSBC down 4.7 per cent after its earnings missed estimates.

Lloyds Banking Group, whose margin outlook disappointed the market on Friday, fell 1.4 per cent, as brokers responded by cutting ratings and target prices for the majority state-owned UK bank.

AB Foods fell 5.9 per cent, topping the list of fallers, as it said tax rises and inflation squeezed consumer spending in the first two months of this year.

The results dented confidence in the retail sector, with Wm Morrison Supermarkets down 2.1 per cent and Next off 2.4 per cent.

“With more gloomy news from Primark today on high street trading, we remain cautious in the short term about the general retail sector,” Nick Bubb, analyst at Arden Partners said.

Elsewhere, Pearson added 0.9 per cent as the publisher reported “robust” full-year results, leading Numis Securities to raise its target price.

UK real estate firms Hammerson, British Land and Land Securities rose 2.3 to 3.2 per cent. Traders cited bullish views on land values and an upsurge in residential developments in London and other parts of the UK.

Outside of the top flight, the FTSE 250 rose 12.32 points, or 0.1 per cent, to 11,621.29.

Taylor Wimpey was one of the top risers, gaining 4.6 per cent on talk that it has a number of interested bidders for its US and Canadian asset sale.