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FTSE ends lower, dragged by banks, defensives

Published 12/29/2010, 12:03 PM
Updated 12/29/2010, 12:08 PM
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* FTSE falls 0.2 percent in holiday-thinned volume

* Miners shrug off China rate hike, precious metals gain

* S&N weighed by FDA announcement, other defensives fall

By Simon Falush

LONDON, Dec 29 (Reuters) - Defensive stocks and banks pulled Britain's top shares slightly lower by close of trade on Wednesday, offsetting gains from miners and energy stocks pushed higher by buoyant commodity prices.

The FTSE 100 ended down 12.56 points, or 0.2 percent, at 5,996.36, having closed at a fresh 30-month high on Friday and above 6,000 for the first time since June 3, 2008.

Commodity stocks have powered much of the FTSE 100's gains this year, and they looked set to end 2010 on a strong note.

Miners have gained almost 30 percent so far this year, compared with a 10.8 percent gain for the FTSE 100, and rose 108 percent in 2009, bouncing from a 56 percent drop in 2008.

Precious metals operators African Barrick Gold and Randgold Resources rose 6.3 percent and 3.4 percent, respectively, lifted by higher gold prices.

Energy stocks were also broadly firmer as crude held above $91 per barrel, with Royal Dutch Shell up 1.3 percent.

"People are still buying stock around these levels as the spectre of a double-dip (recession) has gone away, and we are likely to see the levels maintained in 2011," said Angus Campbell, head of sales at Capital Spreads.

London-listed shares were trading for the first time since Christmas and to some extent caught up with the decline on mainland Europe earlier in the week, partly due to China's move to raise interest rates on Christmas Day.

However, holiday-season volumes were low, with less than half of the average daily volume of the last 90 trading days.

The index has gained 25 percent since it touched the year's low at the start of July.

Banks weighed on London's blue chips, blighted by lingering concerns over Europe's debt problems. Lloyds Banking Group lost 1.7 percent.

Elsewhere, Smith & Nephew shed 1.3 percent after news on Tuesday that the U.S. Food and Drug Administration warned the British orthopaedic device maker that it failed to establish adequate manufacturing validation procedures for a hip replacement device.

"It's all about sentiment rather than any big problem," a trader said. "You've also got to bear in mind that S&N shares have had a good run recently on vague takeover speculation, so investors only need a small excuse to bail."

Other defensive stocks were also weaker, with utility Centrica down 1.8 percent and outsourcing firm Serco off 2 percent as investors tweaked their asset allocation moving in to year-end.

Alliance Trust, BT Group, Burberry Group and Experian took 1.08 points off the FTSE 100 index as new buyers would not be entitled to their next dividend payments.

The FTSE remains on track for its strongest December since 1987. It is up 8.5 percent so far this month, albeit in wafer-thin volume.

The index looks to be vulnerable from a technical perspective, however, analysts said.

"The FTSE continued to crawl near the psychological 6,000 level without much fanfare," said Enis Mehmet at Autochartist.

"Traders seem to be content with the market at this level, feeling neither too bullish nor bearish ... This could be a sign that traders are becoming concerned about the strength and direction of this index." (Reporting by Simon Falush; Editing by Will Waterman)

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