FTSE Close: Miners down; Centrica, Rolls-Royce up

By Adrian Lowery
Updated: 12:18 EDT, 12 November 2010

17.15 (close)

A volatile session driven by talk of a bail-out for the Irish economy and possible moves to cool Chinese growth kept investors on their toes today.

The prospect that Beijing will hike interest rates spooked mining stocks in London and meant the FTSE 100 Index closed 18.4 points lower at 5796.9.

Investors were also disappointed by the lack of firm action from G20 leaders in South Korea, although countries were at least able to pledge that they would avoid the "competitive devaluation" of currencies.

But traders' confidence in banking stocks was lifted by speculation of an EU rescue package to tackle Ireland's debt crisis, with Ulster Bank owner Royal Bank of Scotland recovering 0.9p to 41.9p after dropping yesterday on fears over its exposure to an Irish default.

The euro, which has taken a battering in recent sessions, strengthened against the pound and US dollar after a joint statement from five European finance ministers reassured investors that a bailout from the European Union would not cause them heavy losses.

The pound was down against the euro at 1.18 and up by 0.5% at 1.61 against the US dollar.

The biggest rise in the FTSE 100 came from Rolls-Royce after it appeared to identify the cause of the engine failure that forced a Qantas A380 superjumbo into an emergency landing last week.

It revealed that a component in the turbine of the engine sparked an oil fire and led to the release of another part - a turbine disc.

Rolls said the event will have an impact on financial results this year, but investors were relieved that the cost is unlikely to have a major bearing on its rate of growth. Shares in the under-pressure company improved 27p to 611p.

Utility stocks were also higher after British Gas owner Centrica became the latest firm to increase prices for domestic electricity and gas customers.

Faced by a 25% hike in wholesale costs in the last year, Centrica will increase its tariffs by 7% on average from next month. Shares were 4.2p higher at 340.2p, while Severn Trent lifted 8p to 1444p and United Utilities improved 4p to 628.5p. Scottish & Southern Energy, which announced an increase in its prices last month, added 18p to 1161p.

Elsewhere in London, the pressure on mining stocks caused by fears of Beijing rate hikes meant Kazakhmys fell 53p to 1498p, Antofagasta dropped 40p to 1432p and Lonmin dipped 22p to 1767p.

Outside the top flight, shares in model railway firm Hornby rose 7p to 150.5p as it offset a drop in half-year profits by saying it was well-placed for Christmas trading.

The biggest FTSE 100 risers were Rolls-Royce up 27p at 611p, Invensys ahead 7.9p at 318.8p, Royal Bank of Scotland up 0.9p at 41.9p and Tesco ahead 7.1p at 418.6p.

The biggest fallers were Kazakhmys down 53p at 1498p, Antofagasta off 40p at 1432p, Xstrata down 38.5p at 1380.5p and Admiral off 41p at 1562p.

12.00

There's not much firm action from G20 leaders in South Korea, although countries were at least able to pledge that they would avoid the 'competitive devaluation' of currencies.

The FTSE 100 index has recovered to stand stand just 12.8 points lower at 5,802.3 after EU ministers moved to calm bond market jitters over Ireland.

Their comments addressed concerns that private investors would have to bear a share of the burden in future bailouts of countries in fiscal crisis.

Utility stocks are higher after British Gas owner Centrica became the latest firm to increase prices for domestic electricity and gas customers.

Faced by a 25% hike in wholesale costs in the last year, Centrica will increase its tariffs by 7% on average from next month. Shares were 3.7p higher at 339.7p, while Scottish & Southern Energy added 24p to 1167p, Severn Trent lifted 14p to 1450p and United Utilities added 4.5p to 629p.

10.00

The London stock market was spooked by fears over Ireland's debt crisis this morning, with the Footsie sliding 1%.

The FTSE 100 was down 57.8 points at 5,757.4, as investors wondered whether, or when, Ireland will be forced to go to the European Union for a Greece-style bailout.

Speculation that China will raise interest rates also hit Asian stocks overnight and worries over the possible impact on economic growth prospects hit miners in London.

Xstrata was 36p down at 1,383.5p and Antofagasta was 46p down 1,426p.

Financials were among the hardest hit, with Man Group 6.5p down at 286.7p and Barclays 5.1p down to 279.8p.

But Royal Bank of Scotland recovered 0.78p to 41.8p after falling 2.7% yesterday on concerns over its exposure to Ireland. BofA Merrill Lynch said the sell-off was overdone and was an opportunity to buy into the stock.

At the G20 summit in Seoul, European Union leaders sought to reassure investors unnerved by Ireland's fiscal problems they would not be forced to take a writedown.

Ireland's prime minister said recent French and German comments had aggravated the problem.

'The conclusion of the G20 was more work in progress and now that is out the way the market is looking for focus,' Mike Lenhoff, chief strategist at Brewin Dolphin Securities in London said. 'Markets have been technically over-bought for some time and are vulnerable to profit taking. It could result in a couple of hundred points coming off the FTSE.'

Tullett Prebon dropped 7p to 362p, down for the second day in a row, after the mid-cap interdealer broker reported a drop in quarterly revenue.

A shortened risers board was led by Rolls-Royce after it said an oil fire in one of its Trent 900 engines caused the failure which forced a Qantas A380 superjumbo into an emergency landing last week. It revealed the fire was linked to a component in the turbine of the engine.

Rolls said the event will have an impact on financial results this year, but investors were relieved at signs of progress in the Qantas inquiry as shares in the under-pressure company improved 13p to 597p.

Outside the top flight, shares in model railway firm Hornby fell 3p to 145p after it announced a drop in half-year profits.