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FTSE at 6-week low on Europe, geopolitical jitters

Published 11/23/2010, 04:18 AM
Updated 11/23/2010, 04:24 AM
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* FTSE 100 falls 0.6 percent, touches six-week low

* Banks, commodity stocks fall

* Precious metal miners gain ground

By Simon Falush

LONDON, Nov 23 (Reuters) - Britain's top share index fell to a six-week low on Tuesday, with banks and miners the biggest fallers after an exchange of artillery fire in the Korean peninsular and amid fears the euro zone debt crisis could spread further.

The FTSE 100 was down 36.35 points or 0.6 percent at 5,644.48 by 0857 GMT, after closing 0.9 percent lower at a three-week trough on Monday. It earlier fell to a 5,614.65, its lowest since early October.

North Korea fired dozens of artillery shells at a South Korean island, setting buildings on fire and prompting a return of fire by the South, Seoul's military and media reports said.

This rattled investors, already anxious about the euro zone debt situation, and prompted selling of riskier assets like banks.

Barclays, HSBC, Standard Chartered, Royal Bank of Scotland and Lloyds Banking Group fell 1.4-2.9 percent.

"Geopolitical worries on top of contagion concerns are leading to a flight to safety and leading investors to move out of the likes of equities," said Richard Hunter, head of equities at Hargreaves Lansdown.

The UK banking sector is down 3.3 percent so far this week after a 3.4 percent fall last week.

Irish Prime Minister Brian Cowen defied mounting pressure to quit on Monday, saying he would stay in office until parliament passed an austerity budget needed to secure an IMF/EU bailout, then call an early election.

European partners and the International Monetary Fund agreed in principle on Sunday to rescue Ireland with an expected 80 to 90 billion euros in loans to tackle a banking and budget crisis.

The geopolitical uncertainty combined with euro zone jitters helped push the dollar higher, hitting metal and crude prices and denting miners and energy stocks.

COMMODITY WEAKNESS

Rio Tinto lost 2.5 percent while Royal Dutch Shell slipped 0.3 percent.

Gold miner Randgold Resources bucked the trend however, gaining 1.1 percent to top a skimpy list of blue-chip gainers as the price of the yellow metal firmed on geo-political uncertainty.

Fresnillo, which also mines precious metals, gained 0.6 percent.

TUI Travel was the top FTSE gainer, up 2.7 percent, with traders citing a report that parent TUI is in talks with investor John Fredriksen over its stake in shipyard firm Hapag-Lloyd.

On the other side of the Atlantic, the first revision for U.S. Q3 GDP is due at 1330 GMT, U.S. October existing home sales data is due at 1500 GMT, with the latest FOMC meeting minutes at 1900 GMT.

"Let's hope Uncle Sam can brighten the day," said Phil Gillett, trader at Spreadex. "We could see heavier trading volumes as traders in the U.S. wind down ahead of Thanksgiving." (Editing by Jon Loades-Carter)

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