Fall in mining shares takes its toll as FTSE 100 closes lower

WEAKNESS in heavyweight miners dragged the leading share index lower yesterday, although firmer banks, energy issues and some takeover speculation helped limit the falls.

At the close, the FTSE 100 was down 13.92 points or 0.2 per cent at 5,794.53, having hit a three-week high on Tuesday.

“It has been a choppy trading session today with a lack of significant economic data giving the market very few ... drivers,” said Giles Watts, head of equities at City Index.

“As a result, traders have been largely going through the motions with the markets drifting sideways.”

Miners fell back as metal prices eased on the back of a stronger dollar, after US Treasury yields surged on a proposed extension in US tax cuts, and as concerns over potential rate hikes in China weighed on sentiment.

Silver miner Fresnillo and gold miner Randgold Resources were among the worst off, down 4.9 and 3.5 per cent respectively.

Capital Shopping Centres was the biggest FTSE 100 faller, shedding 5.4 per cent after shareholder Simon Property said it might sell its 5 per cent stake in protest over CSC’s 1.6bn pound plan to buy a UK mall, which it sees as value destructive.

Ex-dividend factors weighed on Associated British Foods and Investec, while 3i Group and Vedanta Resources also lost their payout attractions.

Most banks managed to rally on relief at a lack of fresh concerns about European sovereign debt, although global bank HSBC fell 1 per cent, weighing the sector down.

Part-nationalised Lloyds Bank gained 1.4 per cent, while Standard Chartered added 2 per cent ahead of a trading update due today.

Insurers were also in demand, led by Prudential, up 3.7 per cent, with UBS adding the firm to its “Key Calls” list and raising its price target, citing growth prospects in Asia.

Integrated oils were buoyed by gains in BP, up 0.4 per cent, helped by a bullish note from Morgan Stanley.

A smattering of takeover speculation also helped out.

Smith & Nephew was the top blue chip riser, up 9.1 per cent. The Daily Mail’s market report noted talk of a 7.1bn pound, or £8-a-share cash offer from a US private equity consortium for the medical products firm.

Burberry climbed 2.3 per cent as traders cited rumours of bid interest. And security services group G4S added 4.8 per cent as traders pointed to the clearance of a big stock overhang and European sector consolidation hopes.

US blue chips were down 0.2 PER cent by London’s close, weighed by dollar gains and higher bond yields.

The FTSE 100 index is seen gaining more than 8 per cent by the end of 2011, with equity investors shrugging off economic gloom, a Reuters Poll found.The median forecast of 19 equity strategists indicated the FTSE 100 would rise to 5,950 by mid-2011, up 2.4 per cent from its close on Tuesday of 5,808.45, and up 8.5 per cent by the end of the year. The median estimate was almost unchanged from a September poll for mid-2011.