FTSE gives up its 4,000-point hold
Mining sector weight dragged the FTSE 100 index back below the 4,000-point mark on Monday
Rio Tinto was the worst performer in the FTSE 100 index, down 11.3% to 2,208p, amid reports the mining group is preparing to launch ‘Plan B’ should its ‘Plan A’—a $19.5 billion investment from Chinese state-owned shareholder Chinalco—fail. ‘Plan B’ would consist of a rights issue, reportedly in the region of $8-10 billion. Analyst Charles Cooper at Evolution Securities said he believes this option “remains the favourable option to the Chinalco deal.”
Randgold Resources was 8.7% lower at 3,195p, tracking the gold price, while Vedanta Resources lost 5.9% to 770p and Eurasian Natural Resources eased 5.6% to 460p.
Sticking with commodities, oil & gas producers Tullow Oil, Royal Dutch Shell and Cairn Energy each gave back between 1.3% and 2.2% to close at 772.5p, 1,489p and 2,230p respectively.
With commodities weakness accounting for much of the FTSE 100’s fall, the index closed down 0.9% at 3,993.5. This may have been a slide of only 36.13 points but, psychologically, the fall is likely to be magnified in investors' minds as the leading index has given up its key 4,000-point hold. The FTSE 250 index was also in the red Monday, down 40.7 points or 0.6% at 6,885.5. Negative trading in the US also applied pressure, with the S&P 500 index having dropped over 2% by the UK close.
Minimising index losses, however, was a number of financial stocks. HSBC stood out among the gainers, up 3.7% to 450.75p after its record rights issue last week was deemed a success. The bank said yesterday that the take-up rate was almost 97%, removing some of the market’s concern of a stock overhang. Barclays, one of the other banks to have opted against partaking in the government’s asset protection scheme, took on 1.3% to 172.6p, while Lloyds Banking Group added 0.6% to 79.7p. But peers Royal Bank of Scotland and Standard Chartered fell back a respective 2.6% to 29.8p and 3.7% to 960p.
Insurers also diverged, with Legal & General up 0.6% at 51p but Aviva down 5.4% to 238p.
Conversely, the direction of stocks in the property sector was unequivocal: British Land gained 3.4% to 424p, Land Securities took on 3.0% to 497.5p, and Hammerson rose 1.5% to 282p, on the back of signs the economic outlook is improving. On the second line, mid-cap housebuilder Barratt Developments and commercial property firm Segro each ticked up 10.3% to 118p and 3.7p to 21p.
Also featuring on the upside were utilities providers—in demand for their defensive qualities in the weaker market. Centrica was 4.6% higher at 232p, Severn Trent increased by 3.0% to 1,030p and International Power was 2.5% better at 228p.
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