FTSE falls, pressured by weak banks, commodities

FTSE falls, pressured by weak banks, commodities

London: Britain’s top share index fell 1.0% on Monday, pressured by weaker banks on windfall tax concerns, and with miners and energy stocks also weighing, hurt by falls in commodities prices.

At 0910 GMT, the FTSE 100 was down 55.56 points at 5,266.80, having closed up 9.36 points on Friday at 5,322.36 after US employers cut a fewer-than-expected 11,000 jobs in November, the smallest decline since the start of the recession in December 2007.

Banks were in the doldrums after news that Britain was still considering some kind of windfall tax on bankers’ bonuses.

Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered shed 0.7 to 1.8%.

A government source told Reuters on Friday that a tax on banks was one revenue-raising option being considered by finance minister Alistair Darling for his pre-budget report on Wednesday, and weekend newspapers were heavy with speculation on what form this could take.

The mining sector was also on the back foot, impacted by falls in metals prices.

Eurasian Natural Resources, Fresnillo, Vedanta Resources and Xstrata lost 0.5 to 1.4%.

Richard Hunter, head of UK equities at Hargreaves Lansdown, said Friday’s US jobs data has had a negative impact on the miners.

“I think a lot of market economists in the US are now recalculating whether the US recovery is going to be a bit quicker than expected," he said.

“If that’s the case the dollar could likely improve, and if that’s the case, that’ll put pressure on metals prices, which is potentially what we’re seeing this morning," he said.

BHP Billiton and Rio Tinto signed a $116 billion iron ore joint venture agreement on Saturday to combine their Western Australian iron ore operations.

BHP fell 0.6%, while Rio was off 0.4%.

Rio has sold its 50% stake in the Hydrogen Energy International joint venture to its partner BP for an undisclosed sum, it said in a statement on Monday.

Energy stocks were weak, hurt by a 1% drop in the price of crude, with BP, BG Group and Royal Dutch Shell off 1.1 to 2%.

Defensives retreat

Defensive pharmaceutical, telecoms and tobacco stocks fell back after posting gains on Friday, with AstraZeneca and GlaxoSmithKline off 0.7 and 1.4%, respectively, Vodafone down 1.2%, and British American Tobacco 0.9% lower.

Scottish & Southern Energy fell 1.6% after UK energy regulator Ofgem set new price controls.

Britain’s regional electricity network companies should deliver their 2010-15 investments for less than they have proposed to minimise the impact on customer bills of grid modernisation, Ofgem said on Monday.

No domestic data is due for release on Monday, so investors are likely to be focused on Wednesday’s UK pre-budget report, and after that Thursday’s Bank of England Monetary Policy Committee meeting outcome.

Britain’s manufacturing sector will return to growth next year, the recovery gaining pace after a slow first quarter, the Engineering Employers’ Federation (EEF) said on Monday.

Across the Atlantic, US October consumer credit numbers and November’s Employment index should be a focus this afternoon after Friday’s jobs report surprise.