FTSE 100 sinks below 6,000 as banks and miners tumble

COMMODITY and banking stocks dragged the FTSE 100 back below the 6,000 level yesterday, with these sectors pressured by Greece’s debt problems and uncertainty over global economic growth.

London’s blue chip index closed down 42.89 points, or 0.7 per cent, at 5,976.00, having hit a one-week closing high on Tuesday.

Atif Latif, director of trading at Guardian Stockbrokers said: “Most of the weakness is based on selling on the back of more fiscal tightening expected in China post CPI numbers ... coupled with chatter around Greece, in particular that there is still no consistent message coming through from EU officials.”

Bank of England deputy governor Charles Bean warned of the potential for messy consequences from the Eurozone debt crisis that is currently centred around Greece.

He also said commodity price volatility was very much on the radar of the G20, as the Bank of England raised its medium-term inflation forecast.

Integrated oils and miners topped the list of blue chip fallers, sliding in tandem with commodity prices as risk appetite faded.

Banks were also down. Global heavyweight HSBC fell 1.5 per cent after the publication of a strategic review that followed Monday’s first-quarter results.

Other stocks were down due to them going ex-dividend. These included BP, Inmarsat, Morrison Supermarkets, Randgold Resources, Rexam, Royal Dutch Shell, Sage, Unilever and Whitbread.

The US trade deficit widened more than expected in March, which could prompt analysts to trim their estimates of already weak first-quarter US economic growth.

Wall Street was lower as the UK market closed after Walt Disney’s quarterly results missed expectations.

Richard Batty of Standard Life Investments warned expectations for profit growth for global corporates has peaked.

“While the Q1 2011 profits cycle has been robust, with outcomes ahead of initial expectations, investors are rightly worried about the outlook in view of policy headwinds such as tighter fiscal and monetary policy, plus a harsher regulatory environment. Indeed, expectations for profit growth have been moderating recently.”

Back among the blue chips, ITV shed 5.3 per cent after the free-to-air broadcaster said ad sales in May and June will be down on a year ago, prompting UBS to halve its full-year advertising growth forecast to two per cent.

On the upside, Burberry rose 2.7 per cent, after fellow luxury goods companies Bulgari and Hermes posted strong first-quarter sales.

Marks & Spencer added 0.8 per cent after JPMorgan Cazenove’s upgraded its recommendation and price target for the retailer (see Best of the Brokers, above).

Elsewhere, Reed Elsevier climbed 1.8 per cent after the Anglo-Dutch publisher’s investor day on Tuesday, which Credit Suisse said “marked a significant turning point in the company’s communication strategy”.

Defensive stocks were also chased higher by investors with power company International Power and drugmaker Shire up 1.8 and 2.3 per cent respectively.

Outside of the top flight, FTSE All-Share property firm DTZ was the top riser, gaining 21.9 per cent after it revealed takeover interest from an unnamed party.