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Weak commods drag FTSE lower; retailers rebound

Published 05/04/2011, 04:11 AM
Updated 05/04/2011, 04:16 AM
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* Miners, oils lead fallers as commodity prices retreat

* Banks weak; Standard Chartered uninspiring

* Retailers rally as Next Q1 sales beat forecasts

By Jon Hopkins

LONDON, May 4 (Reuters) - Britain's leading share index dropped back in early trade on Wednesday, weighed down by weak miners and oils as commodity prices fall, while retailers rallied as Next's first-quarter sales beat expectations.

At 0757 GMT, the FTSE 100 index was down 42.53 points, or 0.7 percent at 6,040.35, having gained just 0.2 percent on Tuesday after stalling just short of a near-three year high above the 6,100 level early in the session.

"Investors pulled back from a breach of the 6,100 level on Tuesday, and are now regrouping and licking their wounds, with commodity stocks taking the brunt of the selling," said Mic Mills, head of electronic dealing at ETX Capital.

Miners led the blue chip fallers as weaker base metal prices, a 14 percent plunge in silver prices, and a lower-than-forecast manufacturing growth reading in China weighed on the demand outlook for the sector.

Antofagasta was the blue chip index's biggest faller, down 5.8 percent as the Chilean copper miner traded ex-dividend of its interim payout and a 100 cents special dividend.

Overall ex-dividend factors knocked 5.53 points off the blue chip index, with Barclays, G4S, GlaxoSmithKline and Kingfisher all losing their payout attractions.

Energy issues were also weak as oil prices consolidated following falls on Tuesday after industry data showed U.S. crude stocks rose sharply last week.

BP shed 1.3 percent. The firm has agreed to pay a $25 million civil penalty, as well as spend $60 million on enhanced safety measures, to settle a federal probe of a pipeline oil spill on Alaska's North Slope in 2006.

Banks fell back too as investors' risk appetite waned with further trading news from the sector.

Standard Chartered fell 2.0 percent as the lender flagged a rise in cost pressures and recorded double-digit income growth in the first quarter helped by strong economic growth in its core Asian markets.

Part-nationalised domestic lender Lloyds Banking Group fell 1.6 percent ahead of a first-quarter update later this week.

RETAILERS RALLY

Next topped the FTSE 100 leader board, up 4.1 percent as the fashion retailer raised its guidance after its first-quarter sales beat expectations, up 5.2 percent boosted by exceptionally warm weather over Easter. Analysts said Next's results bode well for sector peers, with Marks & Spencer occupying the second top spot on the blue chip leader board, up 2.3 percent.

"Next has flagged that the fine weather over Easter was very good news for Fashion retailers and we all know that Food retailers have had a great time ... (and) M&S has a foot in both camps," said Nick Bubb, retail analyst at Arden Partners.

However, on the macroeconomic front the news was less positive, with British house prices unexpectedly falling in April after two months of strong growth, mortgage lender Nationwide said on Wednesday. Investors were also awaiting British construction PMI data for April, due at 0830 GMT. (Editing by Hans Peters)

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