FTSE 100 breaks its winning streak as risk appetite wanes

BRITAIN’S top share index fell yesterday, snapping a three-session rally, as further airstrikes against Libya and disruption caused by the earthquake in Japan dented investors’ appetite for risk.

At the close, the FTSE 100 index was 23.38 points lower, or down 0.4 per cent, at 5,762.71, having rallied 2.9 per cent over the three previous sessions.

The blue-chip index has lost 3.9 per cent so far in March.

Weakness in heavyweight banks and miners pulled the FTSE 100 lower as investors’ recent return of enthusiasm cooled off, with global lender HSBC losing 1.2 per cent, and global miner Rio Tinto shedding 1.6 per cent.

“Investors remain fickle as the uncertainties in Libya and Japan continue to dominate sentiment,” said Mic Mills, head of electronic trading at ETX Capital.

“There is little reason for optimism anywhere at the moment, and whatever rallies occur there are always more excuses to pull the index lower rather than push it higher,” Mills added.

Companies which make parts for cars, and those that sell them, suffered as the Japanese automotive industry remained at a standstill following the earthquake and tsunami that devastated the country over ten days ago.

Toyota said yesterday that all 12 of its Japanese plants will stay closed until at least Saturday.

Auto parts maker GKN was the biggest blue-chip faller, down 3.8 per cent, while Johnson Matthey which makes catalytic converters, fell 2.6 per cent, and mid-cap motor retailer Inchcape dropped 4.5 per cent.

Ahead of today’s UK budget, which is expected to enforce further austerity measures, investors were also unsettled by concerns that an increase in British interest rates was drawing closer after an unexpectedly big rise in inflation.

Official data showed the annual rate of British consumer price inflation rose to 4.4 per cent in February, its highest in more than two years, and above the 4.2 per cent consensus forecast.

“If the inflationary backdrop is worse than ... previously thought, then the pressure on rates to move higher could well be too much to bear for the Bank of England despite fiscal austerity,” said Gerard Lane, equity strategist at Shore Capital.

Among individual fallers, travel firm TUI Travel shed 1.9 per cent as hopes that its main shareholder TUI AG could launch a mop-up bid for the firm took a dent after a decision to float container shipping unit Hapag-Lloyd, part-owned by the German firm, was postponed.

Fellow travel-related firm Carnival fell 3.1 per cent, as the cruises operator was hit by worries over fuel costs.

Brent crude oil prices pushed back up towards multi-year highs as Western warplanes continued to hit targets in Libya.

Integrated oils & gas was the best performing blue-chip sector led by BG Group, ahead 1.6 per cent.

Oil explorer Cairn Energy gained two per cent as it posted a return to profit in 2010 and also raised expectations of Indian approval for the long-delayed sale of a stake in its Indian business to Vedanta Resources, down 1.7 per cent.

Essar Energy, which fell more than seven per cent on Monday after revealing delays to its Indian projects, yesterday recovered some ground with a two per cent gain, propelling it to the top of the blue-chip leaderboard.

Most miners fell, with silver producer Fresnillo leading the downward charge after losing just over two per cent.