FTSE hits five-week low as commodities, banks sag

* FTSE 100 down 1.1 percent

* Miners, energy weak; China worries hit demand outlook
* Banks sag as risk appetite dims

* FOMC meeting eyed

By Simon Falush

LONDON, Jan 27 (BestGrowthStock) – Britain’s top share index dropped
1.1 percent early on Wednesday as miners and energy stocks fell
on lower commodity prices and investors waited for the end of a
U.S. Federal Reserve policy meeting.

By 0920 GMT the FTSE 100 (.FTSE: ) was down 56.07 points at
5,220.78, touching its lowest level since Dec. 21 after it
gained 0.3 percent the previous session, snapping a four-session
losing streak.

Miners were the heaviest drag on the index with metal prices
slipping as the outlook for demand was clouded by China’s
heightened efforts to rein in soaring credit growth, a factor
which helped push Asian stocks lower for a ninth day.

Rio Tinto (RIO.L: ), Xstrata (XTA.L: ), Lonmin (LMI.L: ), Anglo
American (AAL.L: ), Kazakhmys (KAZ.L: ) and BHP Billiton (BLT.L: )
fell 1.5 to 3.9 percent.

“The bad news that allegedly sparked the fall was China
moving the reserve ratio, but that was just the implementation
of what was announced last week so it shows that the market has
got a bit nervous,” said Steven Bell, director at hedge fund
GLC.”

China’s largest bank ICBC, said on Wednesday it has stopped
rolling over some loans after a surge in credit at the start of
the year, in the latest evidence that banks may finally be
heeding a government-directed clampdown.

There were nerves ahead of the conclusion of the latest
two-day Federal Reserve Open Market Committee meeting, although
a decision on U.S. interest rates and the central bank’s
quantitative easing policy is not due until after the London
close, at 1915 GMT. [ID:nN26106537]

Energy stocks were also a significant weight on the index as
crude oil held below $75 per barrel (CLc1: ).

BG Group (BG.L: ), BP (BP.L: ), Royal Dutch Shell (RDSa.L: ) fell
0.8 to 1.9 percent. But Tullow Oil (TLW.L: ) was the standout
loser, down 4.8 percent after it launched a $1.6 billion share
sale to pay for the development of assets in Uganda.

Banks, sensitive to shifts in investor sentiment, were also
broadly lower. Barclays (BARC.L: ), HSBC (HSBA.L: ), Standard
Chartered (STAN.L: ), Royal Bank of Scotland (RBS.L: ) and Lloyds
Banking Group (LLOY.L: ) fell 2 to 3.8 percent.

Hedge fund manager Man Group (EMG.L: ) was also a big blue-
chip faller, down 4.9 percent, as Credit Suisse cut its price
target and estimates and its flagship AHL Diversified fund
posted a 3.6 percent fall over the past week.

Vodafone (VOD.L: ), seen as having sound defensive qualities,
was one of the few stocks in positive territory, up 0.4 percent.

Johnson Matthey (JMAT.L: ) outperformed, off 0.7 percent after
the platinum specialist reported strong third-quarter results
with profits before tax 20 percent higher than in the third
quarter last year.

Ahead of the FOMC decision, a batch of U.S. economic
indicators should attract interest, with the latest weekly
mortgage and refinancing indexes due for release at 1330 GMT,
followed by December new home sales at 1500 GMT.

The only British data likely to be of interest on Wednesday
will be the January CBI distributive trades survey, set for
release at 1100 GMT.

Ex-dividend factors knocked 0.64 points off the FTSE 100
index on Wednesday, with contract caterer Compass Group (CPG.L: )
the only company losing its payout attractions.

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(Editing by Erica Billingham)

FTSE hits five-week low as commodities, banks sag