Miners and debt concerns leave FTSE lower

EXCITEMENT over takeover talks at joint replacement specialist Smith & Nephew was not enough to keep the FTSE in positive territory as miners weighed on the index today.

The FTSE 100 closed down 37.39 points or 0.6 per cent at 5,946.94 as worries over demand for copper in China and the impact of floods in Australia dampened mining sentiment.

Vedanta Resources topped the fallers, losing 3.8 per cent to close at 2,355.00p, while Kazakhmys lost 2.45 per cent to close at 1,552.00p and Fresnillo fell 2.25 per cent to 1,521.00p.

Prosthetic limb maker Smith & Nephew fared better, jumping more than ten per cent following reports it turned down a bid approach from US rival Johnson & Johnson worth 750p per share, or a total $10bn (£6.7bn), before Christmas.

Banks fell on growing jitters over peripheral eurozone debt after reports that Germany and France are pressuring Portugal to seek financial help from the EU and IMF to stop the bloc's debt crisis from spreading.

“With Italy, Portugal and Spain bond auctions looming this week, investors are mindful that the risk of another European sovereign debt crisis has not gone away,” said Yusuf Heusen, senior sales trader at IG Index.

Barclays, however, was up 0.2 per cent, as UBS upgraded its rating to "buy" on hopes its new CEO may soon unveil a restructuring plan to shed low-return legacy assets through creating a “bad bank”.

Another raft of retailers published their Christmas trading updates. Supermarket group Wm Morrison kept its full-year forecasts unchanged after reporting better than expected sales figures, while department store Debenhams was hit slightly harder.

“Debenhams’ shares have slipped back after sales growth slipped around 2.5 per cent, though this was slightly offset by better than expected on-line sales, which were up 88.5 per cent,” said Michael Hewson, a market analyst at CMC Markets. 

Rising oil prices benefited the sector: Tullow Oil rose 1.1 per cent after bullish updates from two of its wells in Ghana and Mauritania, while Shell gained 1.14 per cent to 2,133.00p. However, BP lost ground news that it had to shut down its Alaska oil pipeline because of a leak.

Other major gainers were telecoms giants BT, up 1.24 per cent to 187.30p, and Vodafone, up 1.17 per cent to 176.80p.

The eurozone sovereign debt crisis also weighed on the US, to leave the markets closing broadly flat.

Food and drink manufacturer Sara Lee eased about 2.5 per cent higher on rumours that it may be a target of private equity firms, while chemicals producer DuPont moved up after reports said it had tabled a $5.8bn cash bid for Danish enzyme and food ingredients firm Danisco. 

“The bid looks like it could well be successful after the Danish company said they would recommend the offer to its shareholders,” Hewson said.

He added: “With the fourth-quarter earnings season set to officially begin after the bell tonight with the publication of Alcoa’s latest set of results, equities seem to be struggling for upward momentum after the recent gains of the past few weeks and there is a concern that any positive results from this latest earnings season could well already be priced in.”

The Dow Jones industrial average, which has fallen for the last two sessions, closed down 37.31 points or 0.32 per cent at 11,637.45 while the the S&P 500 ended down 1.75 or 0.14 per cent, at 1,267. The Nasdaq Composite bucked the trend, closing 4.63 or 0.17 per cent higher at 2,707.80.