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Weak commods, banks drag Britain's FTSE lower

Published 03/09/2011, 12:07 PM
Updated 03/09/2011, 12:08 PM
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* FTSE 100 index sheds 0.6 percent.

* Commodity issues weak; Brent crude back above $115

* Prudential strong as results beat forecasts

By Jon Hopkins

LONDON, March 9 (Reuters) - Weak commodity and bank stocks dragged Britain's leading shares index lower on Wednesday as oil prices climbed after intensified fighting in Libya.

At the close, the FTSE 100 was down 37.46 points, or 0.6 percent, 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 on Wednesday 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 percent, 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 percent 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 2 percent

Randgold Resources, however, rallied 3.3 percent 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 euro zone sovereign debt crisis resurfaced, with part-nationalised British lenders Lloyds Banking Group and Royal Bank of Scotland shedding 0.2 percent and 0.8 percent respectively.

Portugal successfully sold two-year bonds on Wednesday, 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 on Wednesday.

U.S. blue chips fell 0.2 percent by London's close, also unsettled by high oil prices and eurozone debt worries.

Prudential was the top riser, up 4.9 percent 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 23.85 pence per share, up 20 percent and outstripping the 21 pence 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.

(Editing by David Cowell)

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