FTSE hits the brakes on 2013 rally as banks and miners lose ground

BRITAIN’S leading share index eased a touch yesterday, stalling after a recent push up to its highest level in four-and-a-half years, weighed by falls in financials and mining stocks.

Banks were the biggest sector fallers, knocking over four points off the FTSE 100, with traders citing profit-taking after recent gains, and caution over a report that several German banks had been asked to simulate a split of their investment banking operations.

Insurers were also weak, led by Standard Life, down 0.8 per cent as UBS downgraded its rating to “sell” from “neutral” in a UK life and general insurance review.

UBS undertook the same downgrade on mid cap Phoenix Group, off 2.1 per cent, citing valuation grounds for both.

“After strong share price performance in 2012, the (insurance) sector no longer offers such clear value, and fundamentals look challenging,” UBS said in a note.

Among weaker miners, Mexican silver miner Fresnillo was the biggest FTSE 100 percentage faller, shedding 2.8 per cent after a fourth-quarter production report, with some analysts citing concerns over the potential introduction of a mining royalty in Mexico.

“Perhaps it’s that that’s spooking investors,” RBC analyst Jonathan Guy said, adding that the results were “decent.”

At the close, the FTSE 100 index was down 1.81 points, or 0.03 per cent at 6,179.17 points, retreating after having hit a fresh 2013 peak at 6,184.02 in early trade.

News of a move by Credit Suisse to reduce its strategy allocation in UK equities also weighed on the London market.

“The FTSE 100 is a defensive market by sector composition and thus tends to underperform when economic lead indicators and global equity markets rise,” Credit Suisse said in a global strategy review.

But the Swiss bank retained its “overweight” stance on the London market, seeing opportunities in real estate stocks and cheap international earners, such as Smiths Group and Shire. Smiths added 1.7 per cent, and Shire 0.8 per cent.

Other stocks perceived as defensive provided the main underlying strength for the market, with drinks groups and food producers standing out.

Food ingredients group Tate & Lyle gained 1.5 per cent with traders citing the impact of an upgrade in rating to “buy” from “hold” by Berenberg Bank, which said the stock is the most undervalued in its sector.

Retailer Kingfisher was a good FTSE 100 gainer, up 1.5 per cent, rallying after recent falls supported by a nine per cent price target hike by Exane BNP Paribas to 350p, in an upbeat review of UK retailers, with the bank forecasting new share buy backs by the DIY stores group.

Exane also upgraded its rating for Next to “neutral” from “underperform” as the bank thinks its forecasts look well underpinned. Next added 1.5 per cent.