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Global growth woes hit FTSE; banks, commods fall

Published 08/31/2010, 07:24 AM
Updated 08/31/2010, 07:28 AM
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* FTSE down 1.0 percent on global growth woes, UK data

* Banks, commods slide as risk appetite wanes

* U.S. points to lower open, data eyed

By David Brett

LONDON, Aug 31 (Reuters) - Britain's top shares were lower by midday on Tuesday, as U.K. economic data added to uncertainty surrounding the global recovery, with risk-sensitive banks and commodity stocks leading the fallers.

Weak mortgage lending pushed total net lending to its lowest since March, Bank of England figures showed, despite an unexpected rise in British mortgage approvals and consumer credit in July.

By 1055 GMT, the FTSE 100 shed 50.86 points, or 1.0 percent at 5,150.70, erasing the 0.9 percent gain on Friday, as UK traders returned to their desks after a public holiday on Monday.

The UK data came after U.S. President Barack Obama fell short of addressing worries the recovery is faltering, and the Bank of Japan's emergency moves failed to curb the yen's strength.

"Investors have wobbled but we're still trading in that two-month range between 5,100 and 5,400 with little to prompt a breakout," Jimmy Yates, head of equities at CMC Markets said.

"Downbeat noises from the U.S. and month-end approaching have aided a clear out in riskier assets."

Energy and mining stocks took most points off the FTSE, falling in tandem with commodity prices as the outlook for global demand clouded over, and as risk appetite ebbed.

Miner Lonmin dropped 2.3 percent, and oil major BP shed 1.4 percent as Hurricane Earl followed a path toward the U.S. East Coast.

Kazakhstan will double its crude oil export duty next year and raise taxes on high earners, the finance minister said on Tuesday, while indicating miners may escape the Central Asian state's drive to swell its coffers.

The banking sector retreated, with Barclays off 2.7 percent.

British outsourcing company Serco Plc was a top faller, down 2.9 percent as BofA Merrill Lynch cut its rating to "neutral" from "buy" ahead of the UK spending review in October.

The UK benchmark fell back below 5,187.41, its 38.2 percent Fibonacci retracement level of the peak in April to the low on July 1.

U.S. CONCERNS WEIGH ON FTSE

U.S. stock index futures pointed to a lower open for Wall Street on Tuesday, extending a sharp decline in the previous session.

Investors will watch for the U.S. June Case/Shiller house price index due at 1300 GMT, August's Chicago PMI due at 1345 GMT, and Conference Board consumer confidence for August due at 1400 GMT, for clues as to the state of the World's largest economy.

On the upside, chipmaker Arm Holdings, which has been the subject of M&A speculation involving its customer Apple Inc recently, rose 4.4 percent after U.S. peer Intel Corp unveiled a deal on Monday to buy German chipmaker Infineon Technologies AG's.

British distributor Bunzl, which supplies carrier bags, take-away boxes and hard hats, gained 2.0 percent after it beat forecasts with an 8 percent rise in first-half profit after completing two acquisitions and signalling it would buy more in the coming year.

"Despite the fact that corporate earnings have been fairly strong both sides of the pond, unfortunately the bears are in the driving seat in as much as there are now concerns around whether that is sustainable for the third quarter," Richard Hunter, head of UK Equities at Hargreaves Lansdown Stockbrokers said.

(Editing by Erica Billingham)

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