Weak demand for commodity and bank shares drag on FTSE

WEAK commodity and bank stocks dragged Britain’s leading shares index lower yesterday as oil prices climbed after intensified fighting in Libya.

At the close, the FTSE 100 was down 37.46 points, or 0.6 per cent, at 5,937.30, having hit a low for the week at 5,922.66 in the afternoon before recovering.

“Only a dyed-in-the-wool optimist would be forecasting significant short-term gains for shares whilst the Libyan unrest continues,” said Anthony Grech, head of research at IG Index.

“With the FTSE currently trading where it was at the beginning in February ... it would not be too adventurous to expect this ‘up one day, down the next’ trading pattern to continue for the foreseeable future,” Grech added.

Brent crude pushed back above $115 a barrel yesterday as fighting in Libya intensified, and after OPEC said it saw no need to hold an emergency meeting to ease oil supply fears.

Integrated oils were the biggest blue chip fallers, with BP off 1.8 per cent, retracing recent gains as investors’ risk appetite diminished on concerns that high oil prices will stifle the fragile global economic recovery.

Oil explorer Tullow Oil was the biggest FTSE 100 faller, down 3.2 per cent after the firm’s results lagged forecasts and it gave scant detail on a key Ugandan project.

Miners were weak as copper prices fell on concerns high oil prices will stoke inflationary pressures and curb demand for metals, with Antofagasta losing two per cent

Randgold Resources, however, rallied 3.3 per cent as the gold price saw safe haven support.

The West Africa-focused firm said its Tongon mine in Ivory Coast was operating as normal, albeit with some interruptions and delays related to the violence in the country.

Banks also suffered as fears about the Eurozone sovereign debt crisis resurfaced, with part-nationalised British lenders Lloyds Banking Group and Royal Bank of Scotland shedding 0.2 per cent and 0.8 per cent respectively.

Portugal successfully sold two-year bonds yesterday, but the cost of borrowing was the most expensive since it joined the euro, keeping alive concerns it will need to request an international bailout.

Ex-dividend factors accounted for a big chunk of the blue chip index’s decline, with BHP Billiton, British American Tobacco, Hammerson, Serco, Shire and Standard Chartered all losing their payout attractions yesterday.

Prudential was the top riser, up 4.9 per cent to levels not seen for two years, after full-year results from Britain’s biggest insurer beat consensus forecasts and it said investors would get a payout of 23.85p per share, up 20 per cent and outstripping the 21p expected by analysts.

“This expression of future confidence in prospects should help to mollify shareholders upset by the distraction of the failed AIA approach last year,” said Richard Hunter, Head of UK Equities at Hargreaves Lansdown Stockbrokers.

World stocks as measured by the MSCI world equity index and the Thomson Reuters global stock index rose 0.2 per cent yesterday. The MSCI index is only ticks away from its 30-month high hit in mid-February.

Meanwhile, the FTSEurofirst 300 index was up 0.3 per cent, erasing earlier losses, while MSCI’s emerging equity index also gained 0.3 per cent yesterday.