Weak banks and commods weigh on Britain’s FTSE

* FTSE 100 down 0.7 percent after six sessions of gains

* Banks weak on stress test worries, reversing Tuesday rally

* Miners reverse as China data fears outweigh upbeat updates

By David Brett

LONDON, July 14 (BestGrowthStock) – Britain’s top share index fell
on Wednesday, after six days of gains, with banks hit by fresh
stress test concerns, and miners reversing as China growth fears
outweighed robust updates from Fresnillo and Rio Tinto.

By 1108 GMT, the FTSE 100 (.FTSE: ) was down 38.55 points, or
0.7 percent, at 5,232.47, slipping back having hit its highest
close in over two weeks on Tuesday and after rallying more than
9.5 percent since the index hit its 2010 low on July 1.

Banks were the worst performing blue chip sector, dropping
back after big gains in the previous session, with Lloyds
Banking Group (LLOY.L: ) worst off, losing 1.5 percent.

Investors were concerned that European Union finance
ministers remained divided over what data would be published in
the bank stress tests due in 10 days time. [ID:nLDE66C1GF]

“I think there’s a combination of factors (dragging the
market down) chiefly profit taking but also certain worries as
to what this bank stress testing will deliver,” said Stephen
Pope, chief global equity strategist at Cantor Fitzgerald.

The tests of the European Union’s top banks should show how
they could withstand severe shocks without taxpayer help.

ICAP (IAP.L: ) was the top blue-chip faller, down 5.2 percent
after the world’s biggest interdealer broker reported volumes
slowing significantly in June due to a cut in appetite for risk.
[ID:nLDE66C1XM]

Miners reversed earlier gains as worries over the
sustainability of growth in China, the world’s largest consumer
of metals, outweighed bullish production updates from Fresnillo
(FRES.L: ) and Rio Tinto (RIO.L: ) and Monday’s robust earnings
numbers from U.S. metals group Alcoa (AA.N: ).

Fresnillo was up 0.7 percent, but Rio Tinto (RIO.L: ) joined
the majority of miners lower, falling 0.2 percent after the
world’s No.2 iron ore miner flagged concerns over a possible
double-dip recession and slower Chinese growth.

“Rio’s indicating the worry about a slowdown in Chinese
growth and I guess that has just impacted on sentiment,”
Cantor’s Pope said.

Investors were looking ahead to industrial output data from
China, due out on Thursday, with fears they might fall short of
expectations.

BP GAINS CAPPED

Integrated oils were weaker along with the price of crude
(CLc1: ), with BP (BP.L: ) shedding 1.2 percent, having jumped 12.5
percent in the past two sessions.

The oil major said it had delayed a critical test that will
determine if it can close a cap at its ruptured Macondo well
that has leaked oil into the Gulf of Mexico for the last 12
weeks. [ID:nN13221621]

Elsewhere, BAE Systems (BAES.L: ), Europe’s biggest arms
contractor, fell 1.5 percent, hurt by a downgrade to
“equal-weight” from “overweight” by Morgan Stanley, which cited
sustained pressure on defence budgets.

On the upside, tech stocks got a boost after the world’s top
chipmaker, Intel (INTC.O: ), posted forecast-beating
second-quarter results and gave a stronger-than-forecast next
quarter sales outlook, with blue chip microchip designer ARM
Holdings (ARM.L: ) up 3.6 percent, while mid cap CSR (CSR.L: ) added
2.6 percent.

Riding the coat tails of the chip sector gains, software
firms Sage Group (SGE.L: ) added 1.0 percent.

And positive broker initiations helped travel firms Thomas
Cook (TCG.L: ) and TUI Travel (TT.L: ), and Compass Group (CPG.L: ),
the world’s biggest caterer, add between 0.4 and 0.8 percent.

There was better news on the state of the UK economy on
Wednesday, with the number of Britons claiming jobless benefit
falling by slightly more than expected last month, official data
showed. [ID:nONS006746]

“There’s a bit of backing away from the 200-day moving
average of 5,323, which is to be expected… but if we can get
through it (backed by good earnings) then we can expect the FTSE
100 to make some good strides,” Cantor Fitzgerald’s Pope said.
(Editing by Mike Nesbit)

Weak banks and commods weigh on Britain’s FTSE