FTSE slips as metal price drop weighs on mining firm shares

BRITAIN’S top share index closed down yesterday, hurt by heavyweight stocks trading ex-dividend and miners following metals prices lower.

The FTSE 100 closed down 39.04 points, or 0.6 per cent, at 6,052.29, having closed up 0.7 per cent on Tuesday at its best level since May 2008.

“You have to consider (the FTSE 100) lost 20 points on (companies trading) ex-dividend. The market’s just having a bit of a respite while we wait for further direction,” said Mic Mills, head of electronic trading at ETX Capital.

Stocks that lost the attraction of their next dividend payment included BP, GlaxoSmithKline and Royal Dutch Shell.

Miners weakened after a late rally on Tuesday as copper fell, hurt by questions over demand after top consumer China raised interest rates on Tuesday.

“What we have seen is traders using the weaker copper price as an excuse to take some profits off the table in mining equities, whilst dividends are weighing on oil giants BP and Shell, which is in turn making the energy sector drag the FTSE 100 lower,” said City Index market strategist Joshua Raymond.

“Wheat prices have continued to surge after China reported that its crop was at risk because of a drought on its Northern Plains. If prices break through $8.90 which is the 50 per cent retracement of the 2008 highs to the lows in 2010, then we could well see a sharp move to the $10.00 mark. Corn prices, in turn could be set to test towards their 2008 highs at $7.99,” said CMC market analyst Michael Hewson. Elsewhere, Reckitt Benckiser was among the top blue chip fallers, down 5.1 per cent after missing forecasts for fourth-quarter earnings.

Market watchers said investors were keeping their powder dry ahead of today’s Bank of England interest rate decision.

“Because expectations are for a (rate hike) at some point over the next few months, there is certainly a risk that there could be one tomorrow, so investors as a result are finding ... an excuse to pull back a bit,” said Angus Campbell, head of sales at Capital Spreads.

Among midcaps, London Stock Exchange rose 3.1 per cent after saying it was buying Canada’s stock market operator TMX. Following the news of the LSE-Toronto bourse merger, Deutsche Boerse and NYSE Euronext confirmed they were in advanced merger discussions.

Some strength was seen from banks and insurers as analysts remained upbeat on equities, and in particular riskier assets, for 2011.

Singer Capital Markets said in a note: “2011 will produce double digit returns for equities as concerns over the banking sector abate and growth remains positive for larger Western economies, albeit at a modest level, with central banks remaining supportive.”

Prudential gained 2.2 per cent as Societe Generale upgraded the life insurer – which replaces Aviva, off 0.3 per cent, as the broker’s preferred stock in the sector – to “buy” from “hold”.

Aerospace and defence companies were aided by a note from Nomura that said it expected commercial aerospace stocks to perform well against the backdrop of an improving cycle.

BAE Systems and Rolls Royce climbed 1.4 per cent and 0.2 per cent, respectively, while GKN rose 2.7 per cent, extending its gains from the previous session.