Britain's FTSE 100 share index closed 2.9 percent lower on Tuesday, snapping a four-day rally as investors dumped overheated mining stocks, while US data and surging oil prices underscored inflationary concerns. The FTSE 100 ended down 184.9 points at 6,191.6, its biggest one-day fall since mid-March and after gaining 1.2 percent on Monday.
The UK's blue chip index has risen 14 percent since March 17 when it hit the year's low, but is still down 4 percent in 2008. "A pause for breath was inevitable," said Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers. "It's ongoing uncertainty with regard to the credit crunch."
Miners swiped nearly 62 points off the index, with Antofagasta, BHP Billiton, Rio Tinto, Anglo American, Xstrata, Vedanta Resources, Kazakhmys, Lonmin and Eurasian Natural Resources losing between 4.5 and 7.9 percent. "I don't think anyone is disputing that (miners') long-term story remains intact ... but there is a concern they might have gone too far too fast," Hunter said.
Banks fell broadly, with Standard Chartered down 2.6 percent, HSBC off 2.3 percent and Lloyds TSB shedding 1.4 percent. Barclays dropped 1.8 percent. The Daily Telegraph said Britain's third-biggest bank was considering making a take-over bid for a rival and could try to buy an investment bank as part of a move to raise capital from shareholders. Barclays declined to comment.
A price target cut from UBS also weighed on the stock. British Land braved the market turmoil, gaining 1.1 percent after the saying the pace of decline in the value of its assets was slowing. The company also said there were increasing signs of investor interest at current levels, although sentiment remains volatile. Marks & Spencer dropped 5 percent after the retailer said its annual profits hit 1 billion pounds but cut its staff bonus and warned a slowdown in consumer spending could run until autumn 2009.
Imperial Tobacco lost 6.2 percent after the world's fourth-largest cigarette group launched a deeply discounted 4.9 billion pounds rights issue to pay for its recent Altadis acquisition. The group also reported an 18 percent rise in half-year earnings. Among mid-caps, Yell Group dived 26.3 percent after the British-based classified advertising directories publisher said it was halving its final dividend due to an uncertain economic outlook.
ICAP, the world's biggest interdealer broker, shed 6.5 percent despite posting a 31 percent rise in adjusted pretax profit for the year ended March, after gaining nearly 12 percent in the previous four sessions. Mitchells & Butlers added 4.3 percent. The pubs operator said it planned to convert to a real estate investment trust (REIT) to fully realise the value of its property estate when market conditions are "suitable".
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