FTSE close: BAE, miners down; Blacks Leisure up

By Adrian Lowery
Updated: 12:36 EDT, 19 October 2010

17.10 (close)

London's blue chip share index dropped into the red today as investor nerves built ahead of key UK economic news. News of the first rate rise in China since 2007, when the global financial crisis began, also caught markets offguard.

The FTSE 100 index closed down 38.6 points at 5703.9 as traders awaited the Government's spending review, as well as the latest interest rate minutes and borrowing and retail sales figures tomorrow.

Mixed earnings figures on Wall Street added to the pressure, with heavy early falls on the Dow Jones Industrial Average sending the Footsie deeper into negative territory.

Disappointing earnings reports from corporate heavyweights Apple and IBM offset better-than-expected results from US investment banking giant Goldman Sachs, leaving the Dow down more than 1% at one stage.

News of a shock decision by China to raise its key interest rate by 0.25% - its first hike in three years - also weighed on global markets as the tactic was seen as a move to slow down its economy.

With potentially lower demand for raw materials, mining stocks plunged with Xstrata among the worst affected, down 4% or 57p at 1248.5p.

It also sent the price of gold down $25.7 to $1,343,3 an ounce.

The pound weakened against the dollar amid the anxiousness over this week's economic developments, as well as a CBI survey showing the worst reading for factory orders last month since April.

Sterling fell 1% to $1.57.

Today's defence budget blow from the Government hit a number of defence-related stocks.

Babcock International dropped 5%, or 28.5p to 564p, while BAE Systems fell 6p to 363.9p.

Banks lost earlier gains, after credit rating agency Fitch said the banking sector was slowly returning to health in the UK, but warned that regulation of capital and liquidity requirements was likely to weigh on earnings in the long-term.

Lloyds Banking Group was the worst off, down 1.7p to 70.5p.

In corporate news, shares in housebuilder Bellway were under pressure after it said it did not expect a pick up in sales before next spring.

Shares fell 6% or 36.5p to 565p, even though Bellway posted full-year results slightly ahead of expectations and increased its dividend.

Meanwhile, retailer Blacks Leisure jumped 25% - up 8p to 42.5p - after it said it had received takeover approaches for some or all of the business.

Sports Direct, which pulled an offer for Blacks in March, fell 1.7p to 147.5p even though the Serious Fraud Office said the company will not face charges in relation to its inquiry into allegations of cartel activity.

Shares in JJB Sports, which was also cleared, were up 0.25p at 10.5p.

The SFO is still investigating individuals in the case, while the Office of Fair Trading added that its own investigation into alleged anti-competitive conduct in the sports goods retail sector was continuing.

The biggest Footsie risers were Diageo up 28p to 1163p, Whitbread ahead 35p to 1728p, Standard Chartered up 38p to 1959p and Autonomy up 25p to 1444p.

The biggest Footsie fallers were Fresnillo down 68p to 1223p, Xstrata off 57p to 1248.5p, Man Group down 10.1p to 259.8p and Vedanta Resources down 79p to 2174p.

15.30: The London market fell into negative territory after mixed earnings reports in the US and ahead of key economic developments later in the week.

The FTSE 100 was down 34.8 points at 5,707.7 as traders awaited the Government's spending review, as well as borrowing and retail sales figures.

Losses accelerated on the Footsie as Wall Street opened deep in the red, shaken by a flurry of earnings reports from corporate heavyweights, including Apple and IBM.

The Dow Jones fell 1% in early trading, down 108.3 to 11,035.

Bank of America, the biggest US bank, recorded higher-than-expected operating earnings, while investment bank Goldman Sachs posted lower quarterly profit but still beat analyst expectations.

'The bank earnings may be easing some of the anxiety out there,' said Lou Brien, market strategist with DRW Trading in Chicago.

12.15:

After early falls the FTSE 100 climbed ahead 13.3 points to 5,755.9.

Autonomy shares were the leading riser, up 5% or 72p to 1,491p, after a reassuring update two weeks after it issued a profits warning.

The group, which helps companies keep track of their e-mails, phone calls and documents, reported a 34% rise in profits for the quarter to September 30.

Meanwhile, retailer Blacks Leisure jumped 25% - up 8.5p to 42.5p - after it said it had received takeover approaches for some or all of the business.

The Millets owner has hired advisers to help it field the offers, which are thought to include proposals from at least two private equity firms.

Sports Direct, which pulled an offer for Blacks in March, fell 1.6p to 147.6p even though the Serious Fraud Office said the company will not face charges in relation to its inquiry into allegations of cartel activity.

Shares in JJB Sports, which was also cleared, were unchanged at 10.25p.

The SFO is still investigating individuals in the case while the Office of Fair Trading added that its own investigation into alleged anti-competitive conduct in the sports goods retail sector was continuing.

10.00:

The market has made a subdued response to seemingly good results from US technology giants Apple and IBM, but banks were lifted by stronger-than-expected results from Citigroup.

Both Apple and IBM posted solid quarterly earnings figures but shares in the pair still retreated in after-hours trading on Wall Street.

With figures on housing starts due for release in the United States later in the session and with the UK government's spending review just a day away, the FTSE 100 Index fell 4.6 points to 5738.1.

'We've seen massive profit taking in Apple, and with so little news around, it takes so little to move markets,' said David Buik, senior partner at BGC Partners.

He said the outlook for UK equities looks to be set fair, however, despite tough times ahead for the domestic economy.

'(The FTSE 100) pays decent dividends, 70% of earnings come from overseas and we've been cheered so far by a decent set of earnings, and I don't see any other asset class as looking attractive.'

Xstrata fell 23.5p to 1,282p after it posted mixed third-quarter production data.

But technology stocks were the sharpest fallers, after Apple reported weaker-than-expected iPad shipments. ARM Holdings, which designs Apple chips, fell 9.7p to 389.4p.

Banks were on the risers' board for a second session as investors took heart from Citigroup posting third quarter results ahead of expectations.

Royal Bank of Scotland lifted 0.8p to 47.2p and Lloyds Banking Group rose 0.7p to 72.9p, while Barclays was ahead 2.6p to 291.85p.

In corporate news, shares in housebuilder Bellway were under pressure after it said it did not expect a pick up in sales before next spring. Shares fell 9p to 592.5p, even though Bellway posted full-year results slightly ahead of expectations and increased its dividend.

Britain's biggest hotel operator Whitbread gained 5p to 1,698p after it reported a first-half pretax profit at the top end of expectations, boosted by strong growth and new hotel and branch openings at Costa Coffee and Premier Inn.

Meanwhile, retailer Blacks Leisure jumped 25% after it said it had received takeover approaches for some or all of the business. Shares were 8.5p higher at 42.5p.has and as investors remained on the sidelines ahead of significant economic developments later in the week.