FTSE weakens as Ukraine tension grows; Prudential lends support

Tue Aug 12, 2014 7:42am EDT

* FTSE 100 slips 0.1 pct after Monday's 1 pct bounce
    * Prudential gains after H1 profit rise, dividend hike
    * Ukraine conflict weighs on sentiment
    * UBS opens Hargreaves Lansdown coverage with "sell" rating

    By Tricia Wright
    LONDON, Aug 12 (Reuters) - Britain's top shares slipped
lower on Tuesday as tension between the West and Russia over
Ukraine kept investors on edge, though robust results lifted
life and pensions group Prudential.
    A convoy of 280 trucks that Russia said were carrying
humanitarian aid for Ukraine set off on Tuesday, amid Western
warnings to Moscow against using help as a pretext for an
invasion. Ukraine also reported that Russia had massed 45,000
troops on its border. 
    Evidence that Ukraine was affecting Germany, Europe's
biggest economy, came from a decline in the ZEW survey on
investor morale, the ZEW think tank said. 
    The FTSE 100 was down 4.72 points, or 0.1 percent,
at 6,628.10 by 1105 GMT, after gaining 1 percent on Monday,
following a decision by Russia to pull troops back from near the
Ukrainian border.
    But Prudential advanced 1.6 percent after it reported a 17
percent rise in first-half operating profit and raised its
interim dividend by 15 percent. Fee income from its U.S.
business and better sales for health and protection products in
Asia boosted the results. 
    "This is a particularly impressive performance given the
tough forex and political headwinds that the group has had to
contend with in H1 2014," Shore Capital said in a note.
    It repeated its "buy" rating on the stock, echoing the view
in the broader market; of the analysts with ratings on the
stock, almost 90 percent reckon Prudential is either a "buy" or
a "strong buy", according to Thomson Reuters Starmine.
    But concerns about Russia's involvement in Ukraine hampered
the broader market. Trading volumes were thin, around a quarter
of the 90-day daily average at mid-session. On Monday, volume
had reached just three quarters of the average - a product of
the summer lull and investor reluctance to place big bets amid
the turmoil in Ukraine and the Mideast.
    "Worth staying on the sidelines for now and see how the
geopolitical situation develops," said Lex van Dam, a hedge fund
manager at Hampstead Capital.
    Hargreaves Lansdown was the worst FTSE 100 performer in
percentage terms, falling 2.8 percent after investment bank UBS
opened coverage of the stock with a "sell" rating.
 
    The FTSE 100 hit a peak of 6,894.88 points in mid-May, which
marked its highest level since December 1999. It has since
retreated and is down 1.8 percent since the start of 2014.
    "The geopolitical tensions are going to be a drag on
equities for a while," said Hantec Markets analyst Richard
Perry.    

 (Additional reporting by Sudip Kar-Gupta; Editing by Larry
King)