Banks drag down FTSE as Moody’s raises Spain alarm

By Tricia Wright

LONDON (BestGrowthStock) – Banks dragged Britain’s top share index lower on Wednesday, as investors’ risk appetite waned after Moody’s said it may downgrade Spain’s debt rating and as miners were hit by a firmer dollar pushing metals prices down.

By 1219 GMT, the FTSE 100 was down 16.65 points, or 0.3 percent, at 5,874.56, having ended up 0.5 percent at 5,891.21 on Tuesday, its highest close since June 2008.

Banks were the biggest fallers on London’s blue-chip index, led down by a 3 percent slide in Barclays’ stock as euro zone debt worries resurfaced.

“The banks (are weighing on the FTSE) because of Moody’s putting Spain on watch for a possible downgrade. That’s hit Barclays especially because of its exposure to Iberian debt,” Michael Hewson, market analyst at CMC Markets, said.

Moody’s put Spain’s Aa1 rating on review, citing concerns about its mounting debt and 2011 funding needs, though it did not expect Madrid to need an EU bailout.

A cautious announcement from the U.S. Federal Reserve also knocked sentiment. Overnight, the Fed said the economic recovery was still too slow to bring down unemployment, and reaffirmed its commitment to buy $600 million in government bonds.

STRIKE BALLOT

Mining stocks fell in tandem with metals prices as the dollar rose due to strong U.S. retail sales.

But midcap Ferrexpo climbed 2.8 percent after the Ukrainian iron ore miner announced a 28.5 million euro ($37.97 million) acquisition of Helogistics Holdings, which Evolution Securities said is a key part of Ferrexpo’s expansion plans.

British Airways shed 1.2 percent as the trade union representing cabin crew at the airline said it would ballot members next week over fresh strike action in a dispute that has so far cost the airline 150 million pounds ($238.1 million).

On the second line, SuperGroup, the company behind the Superdry fashion brand, slumped 17 percent after the firm posted first-half results, with Peel Hunt putting its rating under review citing valuation grounds, and with margins likely to come under pressure from rising raw material prices.

United Utilities fell after going ex-dividend.

On the upside, Capital Shopping Centres rose 2.7 percent as Simon Property Group Inc, in a struggle for control over the firm, made a 425 pence per share indicative offer valuing the British mall owner at about 3 billion pounds.

Property group Hammerson added 0.8 percent. JP Morgan Asset Management has agreed to buy the Bishops Square office site in London’s finance district in a deal worth nearly $900 million from a joint venture comprised of Hammerson and the Oman Investment Fund.

U.S. stock index futures pointed to a mixed opening on Wall Street on Wednesday.

($1=.7506 Euro)

(Editing by David Hulmes)

Banks drag down FTSE as Moody’s raises Spain alarm