Britain's FTSE 100 share index ended 1 percent lower on Monday, with mining and energy stocks suffering as the US dollar rose and commodity prices fell, while a sharp decline in ING put pressure on financials. The index ended down 50.83 points at 5,191.74, having risen as high as 5,281.12 earlier in the session. It closed 0.7 percent firmer on Friday.
The index has surged 50 percent from a six-year low in March, though is still about 4 percent below its level in mid-September 2008 before the collapse of Lehman Brothers. "You've got profit taking, you've got a resistance of 5,300, you've got dire GDP numbers on Friday (last week) and you've got companies still going cap in hand to shareholders," said Angus Campbell, head of sales at Capital Spreads.
"All these factors are coming into play and we haven't been assisted in any shape or form by a weak start to trading on Wall Street," he said. Banks were lower, led by part-nationalised banks Lloyds Banking Group and Royal Bank of Scotland, off 7.2 percent and 5.7 percent respectively, with investors unsettled by moves from European peer ING to split in two and launch a 7.5 billion-euro rights issue.
Sector heavyweight HSBC lost 1.8 percent, impacted by a downgrade to "hold" from "buy" by Citigroup, while Barclays shed 2.5 percent. Barclays bought the banking arm of British insurer Standard Life for 226 million pounds to build up its UK mortgage and savings business.
Standard Life was off 1.5 percent, while its peers were also weaker, weighed down by the ING news, with Legal & General down 1.7 percent and RSA Insurance 0.5 percent lower. Prudential, down 3.2 percent, also fell victim to a broker downgrade with SG Securities cutting its rating to "hold" from "buy" on valuation grounds.
Miners were under pressure, retreating as the US dollar rose and metals prices waned. Rio Tinto, BHP Billiton, Antofagasta and Vedanta Resources lost 1 to 1.5 percent. It was a similar story with energy stocks, with crude prices below $79 a barrel. BG Group, Royal Dutch Shell and Cairn Energy dropped 0.2 to 2.4 percent.
Among individual movers, British Airways fell 4.8 percent after a report in the Financial Times said the airline, along with Iberia and American Airlines, may have to give up airport take-off and landing slots to satisfy EU conditions for a proposed tie-up. Deutsche Bank also downgraded its stance on BA to "sell" from "hold."
Gains in defensive stocks helped anchor the FTSE 100 on Monday, as economic concerns resurfaced, prompting investors to look to assets perceived as safe bets. Household cleaning products firm Reckitt Benckiser put on 0.5 percent, while British American Tobacco added 0.2 percent. Cable & Wireless rose 3.3 percent after a weekend press report said it has revived plans for a 3.6 billion-pound demerger of its International business.
"We may well see some choppier trading in the days to come, ahead of Thursday's US GDP figures but, barring any surprises here, most investors seem happy to pounce on these sell-offs and pick up stock on the cheap," said Philip Gillett, sales trader at IG Index.
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