May 13, 2009 / 5:14 AM / 11 years ago

FTSE off 2.1 percent on weak U.S. data

LONDON (Reuters) - The top share index closed down 2.1 percent on Wednesday, succumbing to disappointing U.S. retail sales figures, banks knocked by profit taking and mining stocks weighed by weak commodity prices.

The FTSE 100 index closed down 2.1 percent on Wednesday, succumbing to disappointing U.S. retail sales figures, banks knocked by profit taking and mining stocks weighed by weak commodity prices. REUTERS/Graphic

The FTSE 100 ended down 94.17 points at 4,331.37, retreating for the third straight session.

The benchmark index is down 2.3 percent so far this year, but up 25.2 percent since hitting a six-year low on March 9.

“What you’re seeing here is just a bit of a setback in terms of profits being taken, because after a big run like this, does it spell a complete reversal, or a start of a reversal of the movement we’ve enjoyed since March?” said Stephen Pope, chief global market strategist at Cantor Fitzgerald Europe.

“My view is still ‘no it doesn’t’. We are still in a relatively decent technical position,” he said.

U.S. blue chips fell after U.S. retail sales data came in worse than expected, dampening hopes of a quick economic recovery.

UK economic news was also gloomy, with the Bank of England’s quarterly inflation report saying growth would shrink sharply in coming months before recovering at a slower pace than previously thought.

Banks were the biggest drag on the UK blue chips, amid profit taking in a sector that has jumped nearly 103 percent since its trough in early March. At the same time, investors switched into more defensive stocks.

HSBC, Standard Chartered, Barclays and Lloyds Banking Group

fell 5.1-9.6 percent.

Royal Bank of Scotland, slid 12.6 percent after the part-nationalised bank’s chief executive said it faced serious net margin headwinds.

Miners were also lower, tracking weak commodity prices.

Kazakhmys, Eurasian Natural Resources, Anglo American and BHP Billiton fell 5.3-11.9 percent.

Rio Tinto closed 10.6 percent lighter as its major investors demand afresh that the mining giant scrap a deal with Chinalco and actively pursue a new capital raising or a sale of assets to rival BHP.

Elsewhere among commodity stocks, oils were broadly higher with crude up above $59 a barrel. BG and Royal Dutch Shell added 0.3 percent and 1.6 percent respectively, but BP underperformed, down 1.3 percent after going ex-dividend.

Like the banks, life insurers were under pressure as investors favoured defensives. Aviva, Friends Provident, Legal & General, Prudential and Standard Life fell 1.7-11 percent.

DEFENSIVES LEND SUPPORT

Defensive cigarette makers, food producers and drugmakers were firm, with British American Tobacco, Unilever and Shire adding between 1.5 and 2.8 percent.

But shares in J Sainsbury, also deemed as defensive, fell back, closing down 1.5 percent, as analysts said a slightly better-than-expected rise in full-year profit from the grocer was already factored into a stock price which has a higher valuation than many peers.

Compass, the world’s biggest caterer, ended up 6.1 percent, topping the blue-chip leaderboard, after reporting a 40 percent rise in first-half profit.

Slideshow (2 Images)

Land Securities was the biggest FTSE 100 faller, down 13.2 percent, after Britain’s biggest property company, said the value of its portfolio fell $7.1 billion.

On the second tier, VT Group stood out, up 6.3 percent, after the British defence and support services company beat forecasts with a 41 percent rise in underlying full-year profit and said forward orders are strong.

Editing by David Cowell

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