Banks drag FTSE lower, miners firm as dollar sags

By Simon Falush

LONDON (BestGrowthStock) – Britain’s top share index fell slightly on Thursday as banks retreated, outweighing some strength from miners which were supported by firmer metal prices as the dollar weakened further.

Mobile phone heavyweight Vodafone (VOD.L: ) also rose after an upgrade from Nomura.

By 1126 GMT the FTSE 100 (.FTSE: ) was 11.39 points, or 0.2 percent, lower at 5,735.96 after it gained 1.5 percent on Wednesday, its best closing level since late April.

U.S. stock indexes hit their highest level in five months on Wednesday amid stronger-than-expected earnings from JP Morgan Cazenove and Intel and as the dollar tumbled to a 10-month low.

The strong earnings and weak dollar both helped metal prices extend recent lofty gains, with copper reaching a new 27-month high, which in turn prompted gains in miners. Xstrata (XTA.L: ) gained 1.2 percent and Lonmin (LMI.L: ) added 0.7 percent.

African Barrick Gold (ABGL.L: ) led fallers, however, down 7.8 percent after it cut its 2010 production target for the second time in three months. It said it uncovered fuel theft at its new Buzwagi mine and suspended 40 percent of miners there.

Equity strength and dollar weakness was also helped by expectations that U.S. policy makers were preparing to inject more cash into the economy.

“The Federal Reserve’s open market operations are keeping shorters out of the market, and while that keeps going, I don’t expect much more weakness,” said Jeremy Batstone-Carr, head of research at Charles Stanley.

Banks were the biggest drag on the index, with Barclays (BARC.L: ) down 2.8 percent. Investors were concerned that other banks might follow Standard Chartered (STAN.L: ) in launching rights issues.

STANCHART SOLID

Standard Chartered, which saw sharp falls earlier in the week, bucked the trend, adding 0.9 percent after Seymour Pierce lifts its rating to “outperform” from “hold.”

Vodafone provided the biggest single boost to the index, gaining 1.5 percent after Nomura upgraded it to “buy” from “neutral,” citing positive earnings momentum.

Other stocks perceived as being resilient in the face of economic hard times were weaker, however, as investors switched to more cyclical stocks. Imperial Tobacco (IMT.L: ) was down 1.8 percent and drugmaker AstraZeneca (AZN.L: ) eased 0.2 percent.

ARM Holdings (ARM.L: ) was up 1.7 percent, lifted by strong results from U.S. rival Intel.

No British data are due for release on Thursday, so investors will look to U.S. September producer prices, August international trade figures, and the latest weekly jobless claims numbers to provide some macroeconomic direction.

September PPI is seen up 0.2 percent on the month, and ahead 3.7 percent year-on-year, after 0.4 and 3.1 percent increases respectively for wholesale inflation in August.

“We’ll see what happens in the U.S., if there is poor data and it’s shrugged off, it’s another bullish sign,” said Yusuf Heusen, senior sales trader at IG index.

Technical levels were also being closely watched, with the next significant resistance at 5,795, a peak level hit three times in April just after the previous peak at 5,835, said Michael Hewson, markets analyst at CMC Markets.

(Editing by Michael Shields)

Banks drag FTSE lower, miners firm as dollar sags