Britain's leading share index ended flat on Tuesday, with commodity stocks tracking gains in raw material prices as the dollar eased but cigarette makers and pharmaceutical companies fell. The FTSE 100 closed down 0.43 points at 4,404.79 in a choppy session, after losing 1.2 percent on Monday. Volumes on the blue chip index were at about 76 percent of the index's 90-day average daily volume.
The weaker dollar boosted metal prices, which in turn lifted mining shares. Rio Tinto, Xstrata, Kazakhmys, Eurasian Natural Resources and Vedanta Resources added 0.9 percent to 3.4 percent. BP and Tullow Oil put on 0.9 percent to 4 percent respectively, as crude prices traded above $69 a barrel.
Tim Whitehead, head of portfolio strategy at Redmayne-Bentley, said the market needed better economic news before it can push higher. "There are still potential problematic areas like the Baltic states and Eastern Europe, which could derail the market. For the time being, we think it has found a level and is drifting in a range," Whitehead said.
The benchmark has rallied more than 27 percent from a six-year low on March 9 but has not been able to hold on to gains above the 4,500 level and has been trading between 4,300 and 4,500 in the past month. Thomas Cook soared 10 percent. Europe's second-biggest travel firm said the decision by its majority shareholder Arcandor to file for insolvency will have no impact on its financial position.
It also said it had not had an approach in relation to the acquisition of Arcandor's 53 percent stake or a potential offer for the company. Cigarette makers British American Tobacco and Imperial Tobacco lost 1.9 and 0.3 percent, respectively. Drugmakers, another defensive sector, came under pressure, with AstraZeneca off 1.2 percent and Shire down 1.6 percent.
GlaxoSmithKline ticked up 0.1 percent, after the world's second-biggest drugmaker said it had forged an alliance with Shenzhen Neptunus to make flu vaccines for China, boosting its presence in a key emerging market. "A lot of people are sitting on their hands unsure what to do at the moment, whether this rally has further legs on it or it is now reaching a plateau," said Philip Gillett, sales trader at IG Index.
Despite the rally in cyclical stocks in the past three months due to the moderating pace of economic deterioration, the growth outlook for the world's economy remained cloudy. The banking sector was also weaker, mainly due to index heavyweight HSBC, which slipped 1.1 percent as traders cited concerns that a major stakeholder may need to place shares. But Barclays, Lloyds Banking Group and Royal Bank of Scotland were higher.