Housebuilders, airlines take Britain's FTSE away from record high

Mon Jun 23, 2014 4:14am EDT

* FTSE 100 down 0.4 pct

* Housebuilders hit as tighter monetary policy expected

* High price of oil knocks airlines back

* Miners receive support from China

By Alistair Smout

EDINBURGH, June 23 (Reuters) - Britain's top share index fell on Monday, dropping for the first time in a week and moving further away from all-time highs, hit by a drop in housebuilders and airlines.

Barratt Developments was the top faller on the FTSE 100, down 2.6 percent, while Persimmon fell 2.4 percent, extending recent weakness on concern over tighter monetary policy that may subdue the housing market.

Over the weekend, one of the most dovish members of the Bank of England's governing body said he expected to vote for an interest rate rise before the end of the year.

"He's painting a very clear picture that interest rates will rise before year end, and this idea seems to have taken hold," Alastair McCaig, analyst at IG, said.

The FTSE 100 was down 0.4 percent, or 28.16 points, at 6,797.04, by 0753 GMT, falling for the first time since last Monday and snapping a four session winning run.

The drop left the index 2.2 percent off a record high set in December 1999.

Airlines also suffered as oil, a large input cost, rose to over $115 dollars a barrel, on concerns over possible disruptions to supply from Iraq where Sunni insurgents seized control of more towns over the weekend.

"There's a pretty worrying picture in Iraq, and we're seeing that reflected in the oil price. With the inevitable disruption to supply that is going to be a consequence, that's why we're seeing the likes of easyJet and Tui Travel off as much as they are," McCaig said.

Airline easyJet fell 2 percent in early deals, and Tui Travel was down 1.3 percent

Supporting the market, miners received a boost after data from China came in ahead of expectations, providing reassurance over demand from the world's biggest metals consumer.

The mining sector rose 1.1 percent and accounted for four of the top five risers on the blue-chip FTSE 100 index, after activity in China's factory sector expanded in June for the first time in six months.

The HSBC/Markit Flash China Manufacturing Purchasing Managers' Index rose to 50.8 in June, beating a Reuters poll estimate of 49.7 and moving above the 50-point level that separates growth in activity from contraction, following a 49.4 reading in May.

"The flash manufacturing number showed a surprise expansion compared to expectations of a contraction, indicating that the economy may have bottomed out," analysts at Credit Suisse said in a note. (Reporting by Alistair Smout; Editing by Tom Heneghan)

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