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Oils, miners push FTSE down 1.3 percent by midday

Published 07/06/2009, 07:01 AM
Updated 07/06/2009, 07:10 AM
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* Oil majors slip as crude falls to around $64 per barrel

* Miners fall; metal prices weak

* Defensives in demand

By Tricia Wright

LONDON, July 6 (Reuters) - Declining oils and miners pushed Britain's top share index down 1.3 percent by midday Monday, on the back of weaker crude and metals prices as economic jitters intensified, but losses were capped by stronger defensives.

By 1033 GMT, the FTSE 100 index was down 56.23 points at 4,180.05, after gaining 0.1 percent on Friday.

Falling oil majors were the biggest weight on the blue-chip index, as the crude price fell to a five-week low below $64 a barrel.

BG Group dropped 2.7 percent, while BP and Royal Dutch Shell fell 2.4 percent and 2.2 percent respectively.

The fall reflected weak showings in Asia on Monday and the lack of a lead from Wall Street, closed on Friday for the Independence Day holiday weekend.

"I think there's renewed concern over the rally since March; whether it's sustainable or not," said Angus Campbell, head of sales at Capital Spreads.

"The economic data over the last few days has not been particularly good, so I think we're waking up to a 4th of July U.S. holiday hangover, instigated by the non-farm payroll figures last Thursday, and the outlook is looking a little bit worse than previously thought," he said.

U.S. non-farm payrolls on Thursday showed the world's biggest economy shed 467,000 jobs in June, 100,000 more than forecast.

The FTSE 100 index has surged almost 21 percent since hitting a six-year trough in March, though it is still down 5.7 percent for the year.

Like energy stocks, hit by lower commodity prices, miners were also under pressure against a backdrop of lower metals prices.

Lonmin, Xstrata, Kazakhmys Anglo American and BHP Billiton shed 3.2-8.5 percent.

Rio Tinto fell 4.3 percent after it agreed to sell its Americas food-packaging assets for $1.2 billion to packaging group Bemis, raising yet more much-needed cash for the indebted miner.

Banks also bore the brunt of investor pessimism. Royal Bank of Scotland, Barclays, Standard Chartered, HSBC and Lloyds Banking Group retreated 1.5-2.6 percent.

UKFI, the body in charge of Britain's stakes in leading banks will this week downplay expectations of a quick sale of the shareholdings, The Sunday Telegraph reported.

DEFENSIVES IN DEMAND

Defensive stocks were in demand, as investors piled into assets perceived as resilient to economic weakness.

Household products firm Reckitt Benckiser grabbed the top spot on the FTSE 100 leaderboard, up 1.4 percent, while cigarette maker British American Tobacco added 0.9 percent, and food retailer J Sainsbury gained 0.9 percent.

Pharmaceutical stocks AstraZeneca, Shire, and GlaxoSmithKline climbed 0.5-1 percent.

On the second tier, easyJet was among the biggest gainers, up 2.2 percent following solid June traffic numbers from the discount airline which prompt Numis Securities to raise its rating to "add" from "hold".

After Thursday's disappointing U.S. jobs report, investors will look to June's ISM non-manufacturing sector index, due for release at 1400 GMT, for further clues on the health of the economy across the Atlantic.

The U.S. corporate earnings season gets under way this week, with results expected from oil major Chevron and aluminium producer Alcoa.

No important domestic data was due on Monday, with the main macro focus this week on the latest monthly Bank of England Monetary Policy Committee meeting which starts on Wednesday with the interest rate decision on Thursday. (Editing by Dan Lalor)

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