FTSE falls with investors still cautious ahead of US results

BRITAIN’S top share index fell yesterday, led by Reckitt Benckiser after the company said its chief executive was retiring, and with banks weaker on renewed worries about sovereign debt levels.

The FTSE 100 fell 46.64 points, or 0.8 per cent, to 5,963.80, its lowest close since 31 March. The index is up 1.1 per cent in 2011.

Volumes were 83.5 per cent of the average for the past 90 days, with some investors remaining cautious until more US companies report first-quarter earnings.

“A bit of risk has been coming off the table in the past week. A lot of the big strategists have become more cautious, though it’s more tactical than fundamental, at the start of US reporting season,” said James Buckley, fund manager at Baring Asset Management.

Banks suffered, part of a sectoral sell-off in Europe, as mounting worries over a debt restructuring by overborrowed Greece drove credit default swaps and yields on government paper higher.

Michael Hewson, market analyst at CMC Markets, pointed to the sector suffering “after the IMF warned that global banks will need to raise an incredible $3.6 trillion worth of debt in the next two years, as they compete with indebted sovereigns”. Barclays, HSBC, Lloyds and Royal Bank of Scotland fell between 1.1 and 2.3 per cent.

Barclays Capital cut its target price on Lloyds and kept its “underweight” rating on the bank, saying the UK’s Independent Commission on Banking’s stance on Lloyds “will further dilute returns”.

Consumer goods group Reckitt Benckiser fell 7.5 per cent after the firm said chief executive Bart Becht is to retire, six months after announcing the departure of its chief financial officer.

“It was one of the most highly regarded management teams, in the FTSE,” Martin Dolan, an analyst at Espirito Santo, said. “The fact that they’ve both gone now I think is basically going to cause some people to reassess [the situation].”

The stock traded over nine times average volume of the last 90 days.

Miners fell, with some base metal prices slipping, as investors shied away from riskier assets. Analysts cited concerns ahead of Chinese inflation and GDP data due today.

Chinese inflation in March accelerated to 5.4 per cent from a year earlier, Hong Kong media said yesterday. This reinforced concerns about the government tightening monetary policy in China, the world’s biggest metals user.

Elsewhere, in the resources sector, commodities trading giant Glencore published details of long-awaited plans to raise up to $12.1bn in a London and Hong Kong offering.

Oil heavyweight BP fell 0.9 per cent. BP and Russia’s Rosneft appear to have few options left to salvage a £10bn share swap deal after trying unsuccessfully to buy out BP’s partners in its Russian venture TNK-BP.

Among the midcaps, newspaper, books and stationery retailer WH Smith rose 5.4 per cent after posting a three per cent rise in first-half profit and hiking its dividend as higher profit margins offset lower sales. Supermarket heavyweight Tesco was flat, ahead of its results on Tuesday, with a strong recent run having put it near “overbought” levels in technical terms.

Back in the wider market, technical analysts were bearish. “The 45-point gain [on Wednesday was] not enough to suggest that Tuesday’s slide was an aberration,” said Bill McNamara at Charles Stanley.