Commodities dent FTSE 100 despite strong banking stocks

BRITAIN’S s top share index closed lower yesterday as strength in banking stocks, inspired by forecast-busting results from Barclays, was outweighed by a broad retreat in the mining sector on commodity price wobbles.

The FTSE 100 index closed down 23.01 points, or 0.4 per cent, at 6,037.08.

The FTSE 250, FTSE 350 and AIM 100 all finished slightly down.

Barclays was the standout blue-chip riser, closing up 5.8 per cent. It touched a five-month high after posting a 32 per cent rise in 2010 earnings, thanks to a strong end to the year at investment bank Barclays Capital.

Peers Lloyds Banking Group and Royal Bank of Scotland, set to unveil full-year results next week, rose 1.8 per cent and 2.2 per cent respectively.

But miners, strong risers in the last two sessions, went into reverse as copper fell from record highs on concern that further monetary tightening in China may affect base metals demand.

Chinese inflation hit a lower-than-forecast 4.9 per cent in January, but price pressures excluding food were their strongest in at least a decade and will force the central bank to keep tightening policy.

Anglo American was among the hardest-hit miners, down 3.8 per cent after a Citigroup downgrade to “hold”, the broker citing valuation grounds and lack of near-term catalysts.

Antofagasta also tumbled 3.9 per cent, while Fresnillo and Rio Tinto each shed 2.8 per cent.

ARM Holdings was the heaviest blue-chip casualty. It retreated 4.4 per cent, after strong gains in the previous session spurred by bullish comment from Goldman Sachs. Its shares are still up nearly 49 per cent this year.

Midcap Imagination Technologies advanced 15.9 per cent after its new graphics processor was picked by STMicroelectronics over ARM’s rival technology.

Analysts said that worries about interest-rate rises were souring investor sentiment.

“I think there’s ... fear potentially about interest rates, not just in the UK but one or two other countries too, given that inflation is clearly a bit more of a threat than it once was,” Peter Dixon, economist at Commerzbank, said.

Inflation in Britain rose to double the Bank of England’s two per cent target in January, prompting BoE governor Mervyn King to acknowledge rates may rise quicker than thought.

InterContinental Hotels, the world’s biggest hotelier, met full-year expectations, but fell two per cent. Analysts said IHG’s shares look fully valued.

Satellite operator Inmarsat shed 2.8 per cent, with traders citing a downgrade in rating by Morgan Stanley. Supermarkets group Wm Morrison firmed up 1.8 per cent after buying online baby products retailer Kiddicare for £70m in a first step to building a business selling non-food goods over the internet.

“The story of the trading day has been one of a battle between banks and miners. We have also seen a general trend whereby UK investors are taking their lead from US markets,” Joshua Raymond, market strategist at City Index, said. US blue-chips were 0.3 per cent weaker by London’s close, as a smaller-than-expected rise in retail sales raised doubts about a rebound in consumer spending.