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FTSE pauses after rally, led down by miners

Published 11/08/2010, 04:27 AM
Updated 11/08/2010, 04:32 AM
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* FTSE 100 down 0.1 percent

* Miners decline; African Barrick slips after downgrade

* Rolls-Royce drops, hit by A380 engine issue

By Tricia Wright

LONDON, Nov 8 (Reuters) - Britain's top share index edged lower on Monday, falling back after hitting a 29-month closing high on Friday, as a retreat from miners outweighed an advance from banking stocks.

By 0908 GMT, the FTSE 100 was down 5.02 points, or 0.1 percent, at 5,870.33, after it closed 12.56 points, or 0.2 percent, higher at 5,875.35 on Friday.

"We've had a quiet start this morning, a lot of good news seems to be out of the way with QE2 and non-farm payrolls last week," Manoj Ladwa, senior trader at ETX Capital, said.

"The market looks relatively overbought at the top of the trading channel. We could see some money being taken off the table," he said.

Miners, which last week ramped up solid gains on a weaker dollar after the U.S. central bank embarked on another round of quantitative easing, fell as metals prices eased.

African Barrick Gold led the sector lower, hurt by a Goldman Sachs downgrade to "sell" from "neutral", with the broker saying that output will improve, but it will take time.

"While it is encouraging to hear management outline plans for growth, these opportunities are generally small in-fill projects, and feasibility studies report in 2011 are some way off being approved, and therefore a long way off coming into production," Goldman says in a note.

But Eurasian Natural Resources bucked the weak sector trend, climbing 1.6 percent, ahead of its third-quarter production report on Thursday.

Energy stocks declined in tandem with a fall in the crude price. Tullow Oil dropped 1.3 percent as Goldman Sachs cut its rating on the stock to "neutral" from "buy".

Negative broker sentiment also put pressure on Scottish & Southern Energy, with Nomura cutting its rating on the utility to "reduce" from "neutral".

ROLLS-ROYCE TOP FALLER

Rolls-Royce was the standout FTSE 100 faller, off 3.8 percent, extending losses from last week on the back of the Qantas engine scare.

Australia's Qantas Airways has grounded its A380 fleet for at least another three days as it investigates oil leaks as a possible cause of the explosion which tore apart one of the superjumbo's engines last week.

Inmarsat found favour, rising 1 percent, after the satellite operator posted third-quarter results, while buyers also came in for security services group G4S, up 1 percent after a trading update.

Banks, which received a fillip along with other cyclical stocks in response to the Fed's QE decision and after upbeat corporate newsflow from the sector, gained. HSBC climbed 0.7 percent, buoyed by a Morgan Stanley price target hike, while Standard Chartered put on 1.1 percent.

"The reporting season has also been supportive and financials are hitting consensus or coming in above consensus," Henk Potts, equity strategist at Barclays Wealth, said.

StanChart said investors representing 98.5 percent of its shares signed up for its $5.3 billion rights issue, which will boost the Asia-focused bank's capital ahead of tougher global rules.

No significant domestic economic data is scheduled for release on Monday. (Editing by Jon Loades-Carter)

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