FTSE’s six-day rally ends but pharmaceuticals get a boost
THE FTSE 100 broke a six-day winning streak yesterday on the back of profit taking, especially in banks and commodity shares, leaving some investors wondering whether the recent rally is close to its conclusion.
The index closed down 38.53 points, or 0.7 per cent, at 5134.36 points, after hitting a new 12-month high last week when it topped 5,100.
Equities that have led the recent recovery were hit hardest with miners topping the list of fallers.
Kazakhmys fell 3.3 per cent after Citigroup cut its rating on the stock to “hold” from “buy”, while Vedanta Resources shed 3.5 per cent after Goldman Sachs downgraded its stance on the stock to “neutral” from “buy”. BHP Billiton fell 2.7 per cent. The mining giant plans to use part of a cash surplus of around $18bn (£11.1bn) to fund a round of acquisitions, possibly involving some large rivals. Fellow miners Lonmin, Fresnillo and Xstrata lost between 2.5 and 3.6 per cent.
Banks were led lower by Royal Bank of Scotland, which lost 5.2 per cent after a report the lender was considering a cash call was met with lukewarm enthusiasm by investors.
Lloyds Banking Group, which last week said it was looking for ways to reduce its exposure to the government’s insurance scheme for toxic assets, shed 2.8 per cent, while Barclays, HSBC and Standard Chartered fell 1 to 1.5 per cent.
Energy stocks were mixed as crude dropped below $70 a barrel. Tullow Oil lost 1.8 per cent, after a strong run last week when it reported new oil discoveries, while BG Group and Cairn Energy were 2.5 and 0.4 per cent lower.
Royal Dutch Shell was 0.3 per cent higher, supported by a Banc of America-Merrill Lynch upgrade to “buy”, while BP was up 0.4 per cent.
The uncertainty saw some defensives lend support on the upside as investors sought refuge in risk averse issues.
GlaxoSmithKline and Shire advanced 0.3 and 0.8 per cent each, while AstraZeneca added 0.7 per cent as Nektar Therapeutics said it signed a worldwide licensing deal with the company to develop two of its experimental drug candidates.
With little in the way of data to guide the UK market through this morning’s trade, jittery investors will have to wait for US house price data due out after lunch.