Britain's top shares ended steady on Tuesday as strength in oils offset falls in miners and banks following weaker-than-expected US data that stoked concern about the strength of the economic rebound. The FTSE 100 closed down 0.63 point at 5,396.48 following a 2.7 percent gain on Monday to a three-month closing high.
"Weak US data in the afternoon has not helped sentiment as we have seen again the FTSE fail to finish above the psychologically important 5,400 level," said Jimmy Yates, head of equities at CMC Markets. Light volumes accentuated share price moves as investors took off on their summer holidays, with the FTSE 100 trading at just 70 percent of its 90-day average volume. Banks, which rallied on Monday after forecast-beating results from HSBC, were the biggest drag on the blue chip index. HSBC, which gained 5.3 percent on Monday, lost 1.3 percent after RBS cut its recommendation on Europe's largest bank to "hold" from "buy", saying it expects pre-impairment profit growth and margins to struggle until US short-term rates rise.
Barclays fell 0.4 percent ahead of its results on Thursday. Standard Chartered, however, bucked the sector trend, rising 2.2 percent ahead of its first-half results on Wednesday. Highlighting the fragility of the global recovery, new orders received by US factories fell more than expected in June.
US consumer spending and incomes were unexpectedly flat in June, while personal savings scaled their highest level in a year, according to a government report that implied an anaemic economic recovery for the rest of 2010. Construction sector activity in Britain slowed markedly in July to a four-month low as firms' confidence about the future deteriorated, purchasing managers showed. "There have been some good results which has led to a tradeable rally but there are brooding clouds overhanging the economy and I would use any rallies to prudently trim positions," said Jeremy Batstone-Carr, head of research at Charles Stanley.
Miners retreated as metal prices fell back slightly. Rio Tinto and Kazakhmys were among the worst performers, shedding 0.4 and 1.3 percent respectively. South African investment bank and asset manager Investec was down 5.6 percent after it said it would raise up to $180 million by issuing new shares to shore up its capital base.
Chipmaker Arm Holdings, which had surged to more than eight-year highs following strong results and after signing a deal with Microsoft, fell 6 percent. On the upside, Centrica was the top performer on the FTSE 100, up 3.6 percent as Goldman Sachs lifted its earnings forecast on the gas supplier and repeated its "buy" rating.
Energy firms were the main support, rallying along with US crude oil futures, which rose more than $1 to above $82 as the dollar weakened broadly and ahead of inventory data expected to show crude oil stockpiles in the United States fell last week. BP added 0.6 percent as it tested equipment to deliver the first of two planned killer punches to permanently plug its ruptured Gulf of Mexico oil well.
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