Banks and energy lead UK shares lower

UK shares dipped in thin trade on Tuesday as Moody’s downgrade of France’s credit rating depressed financials and a lower oil price hit energy stocks.

By (Reuters)

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Published: Tue 20 Nov 2012, 6:18 PM

Last updated: Tue 7 Apr 2015, 12:55 PM

By 1115 GMT, Britain’s FTSE 100 was down 0.1 percent, or 6.97 points, at 5,730.61, with energy and banks combining to take around 9 points off the index.

“UK bank exposure into France is not great, but that is probably one of the reasons why the banks are a bit easier this morning,” said Arthur Gordon, co-head of UK sales at Canaccord Genuity.

“People have been cautious about the euro zone as a whole for some time ... there is still skepticism that they are going to pull through it in one piece.”

Moody’s stripped France of its top notch AAA credit rating late on Monday and warned of a fresh downgrade, citing an uncertain fiscal outlook and deteriorating economy.

Energy stocks suffered as Brent crude eased off Monday’s one-month high. Some analysts said that Israel holding off on an imminent ground invasion of Gaza meant that the oil price was less likely to rise in the near term.

The drop in share prices on Tuesday came after a rally on Monday when all sectors rose and the FTSE 100 matched its biggest one-day gain this year, rising 2.4 percent.

The UK market is still down around 3 percent over the past nine sessions, having been hit by concerns over the so-called “fiscal cliff” - $600 billion in tax rises and spending cuts which may throw the United States back into recession if divided U.S. lawmakers can’t reach a compromise.

“We see this as a buying opportunity because we do feel that the fiscal cliff is likely to be resolved in a satisfactory manner by the end of the year,” said James Butterfill, global equity strategist at Coutts.

Underlining the lack of conviction in the fall, volumes were thin. The FTSE 100 had traded just 24 percent of its 90-day average daily volume by mid-session.

The most heavily traded stock on the index was Intercontinental Hotels, trading at 160 percent of its average 90-day volume and leading gains with a 2.1 percent rise following a Barclays upgrade of the hotelier to “overweight” from “equalweight”.

Barclays said in a note it expected Intercontinental to sell some $800 million in assets, with proceeds earmarked for returns to shareholders in 2013.



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