FTSE ends lower as Barclays leads banking sector retreat

BRITAIN’S top shares closed down yesterday, with Barclays leading banking shares lower after it posted first-half numbers and downbeat US weekly jobless claims data later in the day only adding to the downward pressure.

The FTSE 100 closed down 20.38 points, or 0.4 per cent, at 5,365.78, having fallen back from a session high of 5,416.76, after it ended 0.2 per cent lower on Wednesday.

By London’s close, US blue chips were off 0.4 per cent after an unexpected rise in first-time claims for jobless benefits underscored concerns that the recovery in the labour market will be slow.

Barclays fell 4.7 per cent as analysts said its investment banking performance was resilient but uninspiring, costs rose faster than expected and Spanish bad debts remained a worry.

Royal Bank of Scotland shed 0.2 per cent, ahead of today’s first-half results, while HSBC and Standard Chartered were off 0.5 per cent and 0.1 per cent respectively.

But Lloyds Banking Group bucked the weak sector trend, rising 2.1 per cent in the wake of its first-half results yesterday, boosted further after Seymour Pierce lifted its rating on the stock to a “hold” from “sell”.

The Bank of England kept interest rates at a record-low 0.5 per cent yesterday and announced no new quantitative easing purchases, a decision universally expected by economists.

The European Central Bank also kept its interest rates on hold.

Unilever fell 5.2 per cent as the consumer goods group warned of a tougher second half due to higher commodity costs and stiff competition, after reporting second-quarter sales up a slightly worse than forecast 3.6 per cent.

Cobham was the standout FTSE 100 faller, off 6.7 per cent, after the aerospace electronics group said delays in the award of US contracts could continue this year, denting its growth prospects, after it reported an expected two per cent rise in first-half profit.

Insurers were in demand, with Aviva the star FTSE 100 performer, up 7.2 per cent, while RSA Insurance gained 3.9 per cent, after both companies beat profit forecasts in their first-half results.
Among the miners, Rio Tinto added 0.5 per cent after reporting a record first-half profit, driven by booming sales of iron ore to China.

But Randgold Resources was among the top blue chip fallers, off 5.6 per cent, after the West African-focused gold miner said its production for 2010 may fall short of its original target by about five per cent.

Fresnillo, which reported first-half results on Tuesday, fell five per cent as Citigroup downgraded its rating on the Mexican precious metals miner to “hold” from “buy”, saying the company’s share price is getting stretched.

“There has been a feeling building over the last couple of days that the near double-digit percentage rise seen in July for stock market indices has really come far enough for now,” said Anthony Grech at IG Index.