Weak banks drag FTSE down

Britain's top share index closed lower on Thursday, dragged down by banks on worries about rights issues in the sector, while mobile phone heavyweight Vodafone rose following an upgrade from Nomura. The FTSE 100 ended down 20.14 points, or 0.4 percent, at 5,727.21, after gaining 1.5 percent on Wednesday to its highest closing level since late April.
Banks took the most points off the index, after Standard Chartered's announcement of a rights issue on Wednesday sparked worries that sector peers would follow suit. "There's a lot of concern amongst investors that a lot of the banks will have to raise additional capital to comply with Basel III (regulations)," Michael Hewson, markets analyst at CMC Markets, said.
StanChart outperformed its peers, up 0.6 percent and recovering after falls in the previous session, as Seymour Pierce lifted its rating on the stock to "outperform" from "hold". Elsewhere, African Barrick Gold led the blue chip fallers, sliding 9.5 percent after the miner cut its 2010 production target for the second time in three months after uncovering fuel theft at its Buzwagi mine. Sector peers were in demand as dollar weakness supported metals prices.
Johnson Matthey was among the top blue chip gainers, up 2.7 percent, after RBS lifted its target price for the UK specialist chemicals firm to 2,000 pence from 1,800p while repeating its "buy" rating on the stock. Vodafone helped limit the FTSE 100's losses, up 1.6 percent after Nomura upgraded its rating to "buy" from "neutral", citing positive earnings momentum. Other stocks perceived as being resilient in the face of economic hard times were weaker, however, as investors switched to more cyclical stocks.
Imperial Tobacco was down 2 percent and drugmaker GlaxoSmithKline eased 1.2 percent. Chip designer ARM Holdings was up 1.5 percent, lifted by strong results from Intel in the United States. Technical levels were also being closely watched, with the FTSE 100's next significant resistance at 5,795, a peak hit three times in April just after the previous peak at 5,835, CMC Markets's Hewson said.