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Business News/ Money / Personal-finance/  Banks, energy stocks drag FTSE down; miners gain
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Banks, energy stocks drag FTSE down; miners gain

Banks, energy stocks drag FTSE down; miners gain

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London: Britain’s top shares dropped on Monday as the threat of litigation against BP over its oil spill in the Gulf of Mexico hit energy stocks, and with banks down on global economic recovery fears, outpacing miner gains.

By 4:17pm, the FTSE 100 was down 10.77 points, or 0.2%, at 5,264.67, having closed up 0.2% at 5,275.44 on Friday.

However, the FTSE over the course of last week shed 1.1% as worries over the outlook for economic recovery after the U.S. and the UK downgraded their GDP forecasts.

“The news from the states and here in the UK last week is still fresh in investors’ minds, and in the midst of the (British) summer holiday season there is little to tempt the bulls back into the market," said Jimmy Yates, head of equities at CMC Markets.

Banks, sensitive to economic pressures, were among the sharpest fallers, with Royal Bank of Scotland and Lloyds Banking Group down 1.6 and 0.5% respectively.

Adding to the downward pressure on the FTSE, US stock index futures pointed to a lower open on Wall Street on Monday as worries about the global economy persisted.

Investors looking for further clues as to the health of the world’s largest economy await the New York Federal Reserve Empire State Manufacturing Survey for August due at 6:00pm.

At 7:30pm, the National Association of Home Builders/Wells Fargo issues the August housing market index.

Results from state-side retailers Lowe’s Co. and Urban Outfitters will be watched, and third-quarter earnings from Agilent Tech and fourth-quarter results from SYSCO Corp are also due.

Elsewhere, British insurer Aviva, down 0.5%, failed to see off bid speculation despite rejecting a £5 billion ($7.81 billion) offer from rival RSA that analysts and shareholders said might add up.

RSA Insurance Group fell 1.5%. Meanwhile, BP shed 1.6% with traders pointing to mounting worry on the legal threat facing the oil giant after Alabama said it is suing for “catastrophic harm" caused by the Gulf of Mexico oil spill.

The news took the shine off the energy sector which was initially performing well with a rallying crude. BG Group and Royal Dutch Shell reversed earlier gains, falling 0.4 and 0.2% respectively.

Gains among miners restricted losses on the FTSE 100 as Vedanta Resources, up 5.7%, made its play for a controlling stake in Cairn India. Vedanta will spend up to $9.6 billion acquiring as much as 60% of Cairn India, branching out into oil and gas and delivering a cash windfall to its current owners.

Edinburgh-based Cairn Energy, which holds 62.4% of Cairn India, added 3.3%.

“Companies are building strong balance sheets and seeing some recovery in income without translating that into employing more staff or spending it on IT, so that could be a positive indicator (for M&A activity) going forward," said Richard Hunter, head of UK Equities at Hargreaves Lansdown Stockbrokers.

The miners also received a boost as Credit Suisse said in a note that it saw stronger future demand from China, which it believes “is on the cusp of a rebound in after nearly a year of sharp slowing".

Xstrata, one of Credit Suisse’s favoured mining large cap plays, climbed 1%. Gold miners African Barrick Gold and Randgold each rose 1.1%, as investors continued to seek the safe haven characteristics of the precious metal, which rose to its strongest in seven weeks.

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Published: 16 Aug 2010, 05:01 PM IST
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