FTSE 100 close: Miners, financials drag on Footsie

By Adrian Lowery
Updated: 12:22 EDT, 3 June 2009

Unexpectedly good data for the services sector could not save the Footsie from a clutch of stocks going ex-dividend and falls for miners and banks.

Market watcher: Eyes will be on economic data.

The FTSE 100 index was 93.60 points down at 4,383.4, not helped later in the day by a negative open on Wall St, where the Dow Jones was 93.1 points down at 8647.76.

US futures were pointing to a lower opening on Wall Street as investors awaited comments from Federal Reserve chairman Ben Bernanke on the state of the economy.

In London, most of the Footsie's biggest casualties were ex-dividend stocks, with National Grid the top-flight's leading faller - down 39p to 561p, or 6.5%.

Other stocks in same boat were heavyweight telecoms giant Vodafone, down 5.8p to 113p - a fall that wiped more than 10 points off the Footsie. Drinks can maker Rexam shed 23.25p to 306.75p and media firm WPP slid 23.75p to 429.75p - the latter not helped by a downbeat trading update yesterday.

Barclays lost another 5%, or 13.75p to 259.75p, as the fall-out from yesterday's news of a stake-sale by a major Middle Eastern investor showed no sign of easing. Other stocks in the sector suffered: Lloyds Banking Group was 3.5p down to 66p and RBS 2p down to 36.1p.

Manus Cranny at MF Global Spreads says the big question for UK banks is capital raising: 'They have done that in America. Subsequently, does that mean we will need more capital (for British banks)?'

A revers in metal prices saw miners also fall into the red. Lonmin lost 58p to 1510p, and Eurasian Natural Resources was hit even harder with a fall of 18p to 661p, as investors took profits following multi-month highs for metal prices.

Insurer Amlin saw a fall of 2.5p to 341.5p after announcing a share placing worth around £80m to fund a £300m takeover of Fortis Corporate Insurance from the Dutch government.

Tobacco stocks have gained, however, after Citigroup said it is bullish on the sector because of its valuations. British American Tobacco rose 1p to 1,687p and Imperial Tobacco gained 15p to 1,600p respectively.

'The rotation against tobacco since the 9 March market bottom is unprecedented. Our global strategists believe fundamentals will reassert themselves soon,' the broker says in a note. 'The recession and taxes are taking a toll in the developed world, but the industry is not collapsing. Emerging Asia and Africa/Middle-East remain strong.'

Shares in BAE Systems also cheered 5.5p to 338p, after Cazenove repeated its 'outperform' rating on the defence contractor maintaining that the stock 'stands out as a value play at current valuation levels'.

Cazenove says in a note that BAE Systems remains out of favour in a market more focused on earnings recover than earnings sustainability. But the broker believes its valuation remains compelling and is surprised that BAE has missed out on the rally enjoyed by its main US defence peers which are up up 30-50% since 1 March, while the BAE share price is off 10% over the same period.

Cazenove says this appears harsh considering that BAE is the 5th-largest defence contractor in the US market and remains well positioned in growth areas of the US Budget.

The broker says it continues to see BAE as materially undervalued notwithstanding the market's current focus on stocks with a recovery story.

Utility group Northumbrian Water was in the spotlight in the FTSE 250 after reporting a 10% drop in annual profits. Shares in the group - which saw profits hit by last year's energy price rises and lower usage by firms in the recession - fell 3.25p to 245.25p.

Elsewhere, online gaming site Sportingbet failed to hold on to early gains seen after it reported a 34% hike in third quarter earnings. The stock opened more than 2p ahead, but soon slipped 1.5p into the red at 62.5p.