Weak commodities, banks drag FTSE one percent lower

By Simon Falush

LONDON (BestGrowthStock) – Britain’s top shares fell in Tuesday morning trade, pressured by weak miners following an Australian tax on the sector, further falls by energy giant BP (BP.L: ), and banks on fresh euro zone debt contagion fears.

By 0844 GMT the FTSE 100 (.FTSE: ) was down 53.84 points, or 1.0 percent at 5,499.42. The blue chip index closed down 64.55 points on Friday at 5,553.29, a two-month closing low.

BP (BP.L: ) was the top FTSE 100 faller, down 4.1 percent, taking 17 points off the index, as investors’ fretted over the cost of the company’s battle against the giant oil slick off the southern coast of the United States.

Other energy firms were weaker, weighed down by a drop in crude prices. BG Group (BG.L: ) and Royal Dutch Shell (RDSa.L: ) fell 2.7 and 0.6 percent, respectively.

Miners were among the top fallers after Australia imposed a 40 percent mining tax. Rio Tinto (RIO.L: ), and BHP Billiton (BLT.L: ), which are also listed in Australia, fell 4.0 and 3.2 percent respectively.

Other miners were also lower, with Xstrata (XTA.L: ), Lonmin (LMI.L: ), Anglo American (AAL.L: ), Kazakhmys (KAZ.L: ) and Vedanta Resources (VED.L: ) off 0.6-2 percent.

A rate hike in Australia, which raised its key cash rate by 25 basis points to 4.5 percent, and concerns about tighter monetary policy in China also weighed on commodity stocks.

“Mining stocks are pressured by the tax proposals and increased interest rates in Australia, and for BP its difficult to know what the slick might cost,” said Richard Hunter, head of equities at Hargreaves Lansdown.

On Sunday, China’s central bank said it would raise the amount of money banks need to keep in reserves, the third such increase this year in a campaign to absorb excess cash in the economy and stem inflation.

China’s key stock index (.SSEC: ) fell to a seven-month low as investors reacted to the latest policy tightening by the central bank following a market holiday on Monday.

BANKS WEAK

Banks fell back as markets were unconvinced by the bailout of debt-laden Greece, which was finally agreed at the weekend, and on concerns of contagion to other euro zone peripheral countries.

HSBC (HSBA.L<, Barclays ), Lloyds Banking Group (), and Royal Bank of Scotland (RBS.L: ) shed 0.3 to 2.7 percent.

But Standard Chartered (STAN.L: ) bucked the sector trend, up 0.7 percent after posting record first quarter profit (Read more your timing to make a profit.) and income as strong wholesale banking and improving consumer banking outweighed margin pressure from increased competition.

Gains from defensive pharmaceutical and tobacco stocks provided underlying strength for the blue chip index, with AstraZeneca (AZN.L: ), GlaxoSmithKline (GSK.L: ) and Shire (SHP.L: ) up 1.1 to 1.6 percent, while British American Tobacco (BATS.L: ) was 0.8 percent higher.

Inmarsat (ISA.L: ) was the top FTSE 100 gainer, up 4.7 percent, with traders citing renewed speculation that the satellite communications firm could be the target of takeover interest as it reorganized its Stratos subsidiary.

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(Editing by Louise Heavens)

Weak commodities, banks drag FTSE one percent lower