The FTSE 100 index of Britain's leading shares ended down on Tuesday during a choppy trading session as easing credit fears lifted banks but commodities weighed as platinum and oil prices fell. The index was 5.8 points, or 0.1 percent lower at 6,500.4 after hitting a high of 6,567.0 earlier in the day.
A weak start to trade in the US markets dented UK sentiment, after the National Association of Realtors said its Pending Home Sales Index in August fell to the lowest reading since records began in January 2001. But financial stocks were unaffected, as hopes that the credit crunch is now easing pushed Alliance & Leicester, Barclays and HBOS higher.
Troubled mortgage lender Northern Rock, which in early trade lost more than 15 percent, added 2.7 percent as traders cited vague market talk of a rescue package at 175 pence per share. Traders also cited rumours that Northern Rock's buyout fund suitors - which media reports named as JC Flowers and US firm Cerberus - were due to meet the bank later on Tuesday.
Northern Rock declined to comment. UK housebuilders were in demand, with Taylor Wimpey 4.7 percent higher, Persimmon up 5.9 percent and Barratt Developments gaining 4.2 percent, as traders said the sector was aided by short covering ahead of the Bank of England's interest rate decision on Thursday.
"Dow headlines last night in terms of hitting new highs (but) you've had some more weak looking data from the US," said Philip Isherwood, a strategist at Dresdner Kleinwort. "More confirmation today of that US-led slowdown which people are facing.
"The markets have been sitting there, looking at the Fed thinking 'we're going to get Fed cuts' and assuming that they are for free." Miners weighed as platinum prices fell. Lonmin dipped 5.5 percent, BHP Billiton shed 4.4 percent and Rio Tinto lost 2.6 percent. US crude prices fell to under $80 a barrel as a strengthened dollar prompted investors to take profits. BG Group dipped 3.9 percent and Royal Dutch Shell shed 2.1 percent.
Tesco featured on the upside after it reported a slowdown in growth in its core British market in the first six months, but UK like-for-like sales still beat expectations. Chief Executive Terry Leahy said he is "upbeat" about the outlook in the second half. Charles Stanley also raised its rating on the shares to "accumulate" from "hold".
But fellow retailer Kingfisher topped the FTSE 100 leaderboard, climbing 7.4 percent after HSBC upgraded the stock to "overweight" from "neutral", traders said. HSBC declined to comment. "Today is a day where people have paused for thought," added Dresdner's Isherwood. On the recent credit woes, he said: "The world economy took two years to recover from the TMT bubble bursting... I'm not sure that you walk out just knock the dust off your shoulders. It's too simplistic a view but that's one that the market wants to run with."
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