Miners drag on FTSE as China hikes rates, banks slip

* FTSE down 0.3 percent

* Miners slip as China hikes interest rates

* Banks lower as Moody’s cuts Portugal debt rating

By David Brett

LONDON, April 5 (Reuters) – Britain’s top shares fell on
Tuesday after miners fell on China raising rates, while banks
were hit by European debt concerns, but analysts said near-term
support should keep the FTSE from falling further.

Miners (.FTNMX1770: Quote, Profile, Research) were lower along with commodities on
demand concerns after China’s central bank said it was raising
lending rates and deposit rates by 25 basis points.
[ID:nL3E7F51LX]

“Whilst there’s angst about China tightening too
aggressively, most investors accept that it’s necessary and the
alternative is that China don’t do enough and inflation becomes
embedded. It’s a tightrope they’re walking,” Philip Poole,
global head of macro investment strategy at HSBC Global Asset
Management, said.

He said moves to keep inflation under control in China would
not impact his investment strategy greatly for the year and
demand from emerging countries should remain robust.

Vedanta Resources (VED.L: Quote, Profile, Research) rose 2.5 percent after its
chairman said he believed the Indian government would approve
its plan to buy Cairn Energy’s (CNE.L: Quote, Profile, Research) India assets in the next
few days.

Brokers have been bullish on the benefits for Vedanta of the
takeover, saying it would be earnings accretive in the first
year.

By 1117 GMT, the FTSE 100 (.FTSE: Quote, Profile, Research) was down 16.66 points, or
0.3 percent, at 6,000.32, having gained in eight of the past
nine trading days to end at a six-week closing high on Monday.

Banks (.FTNMX8350: Quote, Profile, Research) fell as Moody’s cut Portugal’s sovereign
debt by one notch and saying a bailout was needed urgently.
[ID:nLDE68T0M]

Barclays (BARC.L: Quote, Profile, Research) and Lloyds Banking Group (LLOY.L: Quote, Profile, Research) fell 1.8
percent and 1.2 percent, respectively.

TECHNICAL SUPPORT

Technical analysts said while short-term gains could be
limited, longer term the outlook for equities remained bright.

“If we spend the day above 5,970 you’ve got to still look
for it higher … the absence of reversal signals means our bias
would be to stick with the trend,” said Phil Roberts, chief
technical strategist at Barclays Capital, citing 6,050, the high
just prior to the earthquake in Japan, as the next significant
level of resistance.

Despite the 8 percent rally on Britain’s top share index
since March 15, FTSE technical indicators suggested shares
remain attractively price.

The index is still trading below over bought territory on
its relative strength index.

M&A is seen as a big factor to help drive demand for
equities over other asset classes.

TUI Travel rose 3.7 percent on news its German parent TUI AG
(TUIGn.DE: Quote, Profile, Research) had found an alternate route to exit its container
shipping business Hapag-Lloyd [HPLG.UL] after putting on ice
plans for a flotation. [ID:nLDE734073]

M&A prospects in the sector boosted chip designer ARM
Holdings 2.1 percent as U.S. firm Texas Instruments Inc (TXN.N: Quote, Profile, Research)
announced the acquisition of National Semiconductor Corp
(NSM.N: Quote, Profile, Research).
Elsewhere, insurance consolidator Resolution (RSL.L: Quote, Profile, Research) rose
2.6 percent as Citigroup raised its target price.

Rexam (REX.L: Quote, Profile, Research) gained 1.8 percent after Keybanc initiated the
canmaker with a “buy” rating, pointing to “a leaner structure”
and more settled business portfolio.

Meanwhile, Vodafone (VOD.L: Quote, Profile, Research) slipped 1.5 percent as Nomura
cut its estimates on the mobile communication firm, citing
impending changes to Indian telecom policy and a tough Spanish
outlook.

National Grid (NG.L: Quote, Profile, Research) shed 1.8 percent after HSBC cut its
recommendation to “underweight” from “neutral”.

U.S. stock index futures pointed to a lower open on Wall
Street on Tuesday, ahead of ISM non-manufacturing data and the
Federal Open Market Committee minutes from the March 15 meeting.
(Editing by Louise Heavens)

Miners drag on FTSE as China hikes rates, banks slip