FTSE slips as China action on lending hurts miners

FTSE slips as China action on lending hurts miners

London: Weakness in miners, dented by an uncertain demand outlook in China after authorities there moved to limit lending, pushed Britain’s top share index down 0.3% early on Wednesday.

By 0850 GMT the FTSE 100 was down 11.01 points at 5,502.13 having closed up 18.75 points, or 0.3%, on Thursday at 5,513.14.

Sources in China said authorities had instructed major banks to stop lending for the rest of January after they went on a lending binge earlier in the month, sending stocks in the region sharply lower.

Commodity prices weakened as the move clouded the demand outlook, which hit miners. Rio Tinto, Xstrata, Lonmin, Anglo American, Kazakhmys and BHP Billiton fell 1.6-2.1%.

BHP Billiton, the world’s largest miner, on Wednesday gave an upbeat outlook for commodities, shipping half its record quarterly production of iron ore to China, and setting the stage for higher 2010 output.

“A lot of the momentum in gold and other metals was brought on by the China recovery story, so if that is threatened that will go and other stocks will have to follow," said Nick Serff, market analyst at City Index.

Banks, sensitive to shifts in risk appetite, also retreated, with investors nervous ahead of earnings releases from Bank of America and Morgan Stanley. Barclays, Standard Chartered, Royal Bank of Scotland and Lloyds Banking Group fell 0.3-1.4%.

But HSBC bucked the trend, up 0.2%.

Healthy pharmas

Pharmaceuticals stocks were the main support for the index, after a Republican win in the US Senate race in Massachusetts robbed Democrats of the crucial 60th Senate vote needed to pass healthcare reform.

“The odds of major US healthcare reform, or something that’s not to the Republicans liking, is now looking less than 50% -- and that’s going to help the pharmaceutical companies," said Jefferies analyst Jeffrey Holford.

AstraZeneca and GlaxoSmithKline added 0.3% and 1% respectively, while Shire gained 1.7%, also boosted by an upgrade to ‘overweight’ from ‘neutral’ by JP Morgan.

British jobless numbers will be the main economic focus on Wednesday, with the claimant count forecast to have fallen 2,500 in December after a 6,300 drop in November, and the unemployment rate seen up to 8% from 7.9%.

Average earnings were seen rising 1.6% in November, after a 1.5% rise previously.

Minutes from the first Bank of England Monetary Policy Committee meeting of 2010 will also be released at 0930 GMT, with all nine members expected to have backed the decision to leave interest rates and the central bank’s quantitative easing policy unchanged.

Confederation of British Industry director general Richard Lambert said on Wednesday the best outlook for the country’s economy was a fragile recovery this year that extended into 2011, in a Financial Times interview.

Imperial Tobacco was the top blue-chip loser, down 3.3% after the stock went ex-dividend on Wednesday, taking 2.05 points off the FTSE 100 index.