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FTSE Lays Low After BoE; Unilever, Next Shine

May 08, 2008

A pedestrian walks in front of a financial display screen showing the FTSE 100 in West London. (Cate Gillon/Getty Images)
A pedestrian walks in front of a financial display screen showing the FTSE 100 in West London. (Cate Gillon/Getty Images)

LONDONóBritain's blue-chip index remained weak on Thursday after the Bank of England left interest rates unchanged, with banks dragging against the backdrop of a flurry of well-received company results.

At 1115 GMT the FTSE 100 edged down 14.1 points, or 0.2 percent at 6,246.9.

"You could argue that because there were ... possibilities that there might be some action, those people who had positioned for it may have sold off a bit. But the majority of sensible investors are keeping their powder dry," said Peter Dixon, UK economist at Commerzbank.

"We should be looking for rate moves one to two months or even further down the track."

Banks weighed after the BoE decision to hold rates at 5 percent. Barclays, Royal Bank of Scotland, Lloyds TSB, Standard Chartered and HBOS lost 0.8 to 3.2 percent.

Also weighing on the sector was news that the U.S. Securities & Exchange Commission planned to ramp up transparency in top Wall Street firms.

Further on the macro front, the European Central Bank is also expected to leave rates unchanged at 4 percent when it announces its decision at 1145 GMT.

The National Institute of Economic and Social Research said Britain's economy continued to grow below its trend rate.

"They are going to need to cut again but they don't want to do things too fast," said Graham Secker, UK equity strategist at Morgan Stanley on the BoE decision.

"Inflation is still a little bit problematic and they will want to wait to see hard evidence that what appears to be a meaningful slowdown in March and April is beginning to take hold."

U.S. stocks tumbled overnight on concerns about inflation and higher interest rates as oil jumped to a record high. In Asia, Japan's Nikkei average fell 1.1 percent.

Oil majors BP and Royal Dutch Shell fell as crude prices eased from record highs. The two companies were also among a dozen oil firms which agreed to pay $423 million and clean-up costs to settle litigation over decades of groundwater contamination from the gasoline additive and possible carcinogen MTBE.

Unilever Cleans Up

Among a flurry of companies reporting, Unilever advanced 3.8 percent after the food and consumer goods group beat forecasts with a 7.2 percent rise in first-quarter underlying sales and said it expected sales in the year to beat its target range.

Next climbed 5.2 percent on short covering after the clothing retailer said it continued to believe that sales in the second quarter would "improve significantly" despite falls in first quarter sales.

Also featured on the upside, Sage Group, Britain's biggest software company, added 6.9 percent after it said underlying first-half pretax profit rose 9 percent and said it was confident for the full year.

Among decliners, Carphone Warehouse lost 1.8 percent after Europe's biggest independent mobile phone retailer said it was to sell a 50 percent stake in its retail unit for 1.1 billion pounds to U.S. consumer electronic retailer Best Buy and the two groups would launch a new company.

Enterprise Inns sank 5.9 percent after skyrocketing nearly 30 percent in the previous session after Britain's second-largest pub firm got the go ahead from the government to convert to tax-efficient property status.

Insurer Old Mutual shed 2.8 percent after it reported a 2-percent rise in first quarter life insurance sales, missing analysts' expectations.

But miners offered the UK index some support after Antofagasta said it had reached a binding settlement with the Chilean Water Authority over the construction of the Mauro dam and other related cases over water rights. The sector also buoyed by Lonmin's first-half profit.

Antofagasta strengthened 2.8 percent, Lonmin put on 4.6 percent, BHP Billiton added 1.7 percent and Xstrata gained 2.2 percent.

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