FTSE falls back as miners outweigh car bailout

While news of a $17.4bn bailout for US carmakers brought leading shares back from their worst levels, the dominance of the mining sector in the FTSE 100 proved decisive once more.

The miners susidided on continuing worries about the effect of the global downturn for base and precious metals, with copper for example dropping to a new four year low. A negative note from UBS on a number of companies in the sector also hit sentiment.

Xstrata was the biggest faller of the day in the top 100, down 82.5p to 645.5p as UBS moved its recommendation from buy to neutral and slashed its price target from £19 to 800p. The bank reduced its earnings forecasts for 2008 by 16% due to the fall in copper, and has also lowered its forecasts for coal prices. It has concerns too, about Xstrata's debt levels:

"Xstrata has a very tight debt covenant of three times gross debt to earnings on around $10bn of bank loans. We think there is a possibility that Xstrata may breach this covenant in December 2009. Xstrata's investment case rests on its ability to grow from acquisitions. We believe this strategy is effectively on ice until 2011, when we estimate Xstrata may be in a position to term out its $6bn repayment due in that year."

UBS was also negative on Antofagasta, down 30p to 391.25p, and Anglo American, 142p lower at £14.50.

So despite Wall Street climbing around 100 points by the time London closed, the FTSE 100 finished down 43.73 points at 4286.93.

Insurers were among the leading risers, with RSA Insurance recovering 15.8p at 151.8p and Old Mutual adding 2.7p to 50.3p. But Aviva bucked the trend, falling 17p to 379p as Credit Suisse downgraded from outperform to neutral. Banks had a mixed performance, with Barclays 8.3p better at 148.3p and Lloyds TSB up 8.2p at 134.6p. But Royal Bank of Scotland lost 3.1p to 43.4p.

Pharmaceuticals groups were in demand. AstraZeneca added 34p to £27.36 as it signed a deal to develop an asthma drug developed by US group MAP Pharmaceuticals. GlaxoSmithKline climbed 14.5p to 1243.5p, following news it was starting a Phase 3 trial for a treatment for patients with chronic coronary heart disease.

Housebuilder Taylor Wimpey shook off negative notes on the sector from both UBS and Citigroup. Its shares closed 1.25p higher at 12.75p, with traders attributing the rise to recent comments from chief executive Peter Redfern suggesting the company's debt renegotiations could be completed by February.

Barratt Developments added 2p to 74p as chief executive Mark Clare bought 357,143 shares at just over 69p each. But rival Persimmon fell 19p to 234.75p and Redrow lost 11.75p to 177.25p.

Among the retailers JJB Sports lost 1.51p to 2.95p as the Office of Fair Trading said it was looking at the acquisition of a number of JJB stores by rival Sports Direct. It is already looking to see if Sports Direct's purchase of shares in JJB has any competition issues. Another Sports Direct investment, Blacks Leisure, fell 5.75p to 15p after Seymour Pierce issued a sell note after meeting the company's management.

Finally, broking group Blue Oar - currently trying to fend off a hostile offer from investment group Evolve - rose 1.75p to 13p as rival WH Ireland said it was considering a bid. Blue Oar advised shareholders to take no action.