Weaker commodity stocks pushed Britain's top stock index slightly lower around midday, holding near a four-month high in cautious trade ahead of new European bank capital rules which are set to be finalised this weekend. By 1051 GMT, the blue chip index was down 3.29 points at 5490.87, after hitting its highest close since the end of April on Thursday on the back of bullish jobs data from the United States.
Miners weaker, banks robust While news of a potential 9 billion euro ($11.4 billion) share sale by Deutsche Bank sent banking shares lower across Europe, British lenders fared better as analysts pointed to their strength relative to continental peers.
Regulators meet this weekend to hammer out final rules for lender capital buffers, with talk of a 7 percent core Tier 1 ratio in the market. State-backed Lloyds Banking Group and Royal Bank of Scotland were the pick of the bunch, up 1.4 and 1.6 percent, respectively, but analysts cast doubt over how effective the new rules would be at restoring confidence in the sector.
"With my cynical hat on, if a well-capitalised bank is looking to raise more capital, what does that say a) about the validity of the European stress tests and b) about the strength of the European banking system more generally," said Jeremy Batstone-Carr, head of research at Charles Stanley.
MINER DRAG Miners were the biggest weight on the index, cancelling out some of the sharp gains the previous session, dragged by lingering uncertainty on the global demand outlook, with Eurasian Natural Resources and Anglo American both down around 1.3 percent.
Energy stocks also pulled the index down. BP led the sector lower with a fall of around 0.6 percent after it announced plans to push back the release of its third-quarter financial results due to the Gulf of Mexico oil spill. Gains from defensive tobacco stocks helped limit losses, however, with Imperial Tobacco adding 1.3 percent.
After gains this week and last, technical analysts were pointing to significant resistance not far from current levels. Nicole Elliott, technical analyst at Mizuho Corporate Bank said 5,514 was a key level. "A sort of neckline between topping activity in 1999/2000 and 2006/2007, separating that type of price action from the rallies and falls before and after them."
British annual factory gate inflation slowed more than expected to a six-month low in August, helped by a surprise fall in input prices on the month driven by oil, official data showed on Friday. In the US, July wholesale inventories data is due for release at 1400 GMT. 3I Group was also a strong gainer, up 1.8 percent after a Financial Times report said it was gearing up to exit its holding in Dutch pump-maker Hyva, valued at around 500 million euros ($634.4 million), at a large profit.
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