FTSE ends flat; weak tobacco, drugs offset commods

Britain’s leading share index ended flat on Tuesday, with commodity stocks tracking gains in raw material prices as the dollar eased but cigarette makers and pharmaceutical companies fell.

The FTSE 100 .FTSE closed down 0.43 points at 4,404.79 in a choppy session, after losing 1.2 percent on Monday. Volumes on the blue chip index were at about 76 percent of the index’s 90-day average daily volume.

The weaker dollar boosted metal prices, which in turn lifted mining shares. Rio Tinto (RIO.L), Xstrata (XTA.L), Kazakhmys (KAZ.L), Eurasian Natural Resources (ENRC.L) and Vedanta Resources (VED.L) added 0.9 percent to 3.4 percent.

BP (BP.L) and Tullow Oil (TLW.L) put on 0.9 percent to 4 percent respectively, as crude prices CLc1 traded above $69 a barrel.

Tim Whitehead, head of portfolio strategy at Redmayne-Bentley, said the market needed better economic news before it can push higher.

“There are still potential problematic areas like the Baltic states and Eastern Europe, which could derail the market. For the time being, we think it has found a level and is drifting in a range,” Whitehead said.

The benchmark has rallied more than 27 percent from a six-year low on March 9 but has not been able to hold on to gains above the 4,500 level and has been trading between 4,300 and 4,500 in the past month.

Thomas Cook (TCG.L) soared 10 percent. Europe’s second-biggest travel firm said the decison by its majority shareholder Arcandor (AROG.DE) to file for insolvency will have no impact on its financial position. [ID:nL9729101]

It also said it had not had an approach in relation to the acquisition of Arcandor’s 53 percent stake or a potential offer for the company.

Cigarette makers British American Tobacco (BATS.L) and Imperial Tobacco (IMT.L) lost 1.9 and 0.3 percent, respectively.

Drugmakers, another defensive sector, came under pressure, with AstraZeneca (AZN.L) off 1.2 percent and Shire (SHP.L) down 1.6 percent.

GlaxoSmithKline (GSK.L) ticked up 0.1 percent, after the world’s second-biggest drugmaker said it had forged an alliance with Shenzhen Neptunus to make flu vaccines for China, boosting its presence in a key emerging market.
“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.

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.

German industrial output fell unexpectedly by 1.9 percent month-on-month in April, in a sign Europe’s largest economy is still suffering from a steep drop-off in demand for manufacturing goods. The country’s exports and imports also fell in April.

In the UK, 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 1-1/2 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 (HSBA.L), which slipped 1.1 percent as traders cited concerns that a major stakeholder may need to place shares. But Barclays (BARC.L), Lloyds Banking Group (LLOY.L) and Royal Bank of Scotland (RBS.L) were higher.

© Copyright:  Reuters