Defensives beat a retreat as investors hedge their bets
THE FTSE 100 ended flat yesterday, with commodity stocks tracking gains in raw material prices as the dollar eased but cigarette makers and pharmaceutical companies fell. The index closed down by 0.43 points at 4,404.79 in a choppy session, after losing 1.2 per cent on Monday.
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 per cent to 3.4 per cent.
BP and Tullow Oil put on 0.9 per cent to 4 per cent respectively, as crude prices rose
“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.
The benchmark has rallied more than 27 per cent from a six-year low on 9 March but has not been able to hold on to gains above the 4,500.
Thomas Cook soared 10 per cent. Europe’s second-biggest travel firm said the decison by its majority shareholder Arcandor to file for insolvency will have no impact on its financial position.
Cigarette makers British American Tobacco and Imperial Tobacco lost 1.9 and 0.3 per cent respectively.
Pharmaceuticals, another defensive sector, came under pressure, with AstraZeneca off 1.2 per cent and Shire down 1.6 per cent.
GlaxoSmithKline ticked up 0.1 per cent, after it said it had forged an alliance with Shenzhen Neptunus to make flu vaccines for China, boosting its presence in a key emerging market.
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.
A survey by the British Retail Consortium showed UK retail sales fell last month, as stores struggled to match strong gains booked last year.
But house prices in England and Wales fell at their slowest annual pace in one and a half years in the three months to May and completed sales hit a nine-month high in a sign the market may be over the worst, a survey showed.
The banking sector was also weaker, mainly due to index heavyewight HSBC, which slipped 1.1 per cent 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.