/ 10 March 2008

FTSE dips as US recession fears offset oils

Britain’s FTSE 100 index dipped by mid-session on Monday as concerns of a looming United States recession offset gains in oil shares, HSBC and potential bid target Friend Provident.

By 1201pm GMT, the FTSE 100 was down 6,6 points at 5 693,3, well off its day’s high of 5 718,8 and after hitting its lowest closing level in six weeks on Friday. The UK benchmark index has fallen 12% so far this year.

Miners were the worst hit, shaving more than 25 points off the index, on concerns of slowing global demand and worries that recent merger and acquisition activity may come to nothing, traders said.

Antofagasta, Anglo American, Kazakhmys, Rio Tinto, BHP Billiton, Vedanta Resources were down between 2,6% 4,4%.

But oil major BP rose 2,3% and Royal Dutch Shell added 1,5%, benefiting from an oil price that flirted with $105 a barrel.

”We still have oil close to $105, close to an all-time high. It makes sense to get back into oils,” said Martin Slaney, head of derivatives at GFT Global Markets.

”But overall it’s not a particularly convincing high volume bounce back. I wouldn’t be surprised to see us finish down later on.”

Major European indexes were also weaker by midday.

Wall Street fell on Friday to close at its lowest in 19 months after data showed that employers shed jobs at the steepest rate in nearly five years, while Japan’s Nikkei average lost 2% on Monday to hit a two-and-a-half-year closing low.

HSBC advanced 2,3% after reports the global banking group would try to raise its stake in China’s Bank of Communications (BoCom) beyond 20%.

But a BoCom official, speaking on condition of anonymity, termed as misleading a Bloomberg report that BoCom and HSBC were seeking a waiver from Chinese rules that cap foreign ownership of domestic banks at just under 20%. HSBC declined to comment.

Royal Bank of Scotland added 1,3%, Alliance & Leicester put on 1,4% and Lloyds TSB tacked on 1,7%.

Standard Chartered, however, eased 0,3% after the Middle East Economic Digest magazine said the Asia-focused bank was considering buying RBS’s 40% stake in Saudi Hollandi Bank in a bid to secure a presence in the world’s largest oil exporter.

Friends wanted

Friends Provident advanced 2,5% after the Sunday Express said private equity group JC Flowers was gearing up to launch a £3,5-billion ($7-billion) offer for the life insurer.

Both JC Flowers and Friends Provident declined to comment.

A source familiar with the situation said JC Flowers remained interested in the British insurer but a bid was not imminent.

Housebuilders suffered as Bovis Homes plunged 8,1% after it said 2008 volume would be sharply lower if current weak market conditions continued. Taylor Wimpey lost 4,3%, Persimmon dropped 2,8% and Barratt Developments slipped 1,9%.

Compass Group shed 4,3% after Goldman Sachs downgraded the world’s biggest caterer to ”sell” from ”neutral”.

Wm Morrison Supermarkets was up 1,5% after weekend newspapers said Britain’s fourth-largest food retailer was set to unveil a share buyback of up to £1-billion over the next two years. – Reuters