FTSE sheds 1.5 pct as firmer dollar hits commods
By Rebekah Curtis
LONDON, June 4 (Reuters) - Britain's blue chip index slid 1.5 percent on Wednesday, dragged into the red by oil and mining shares as a firmer dollar bit into commodity prices.
Oil shares were the biggest sectoral loser as U.S. crude oil prices CLc1 dropped to near $123 a barrel. BP (BP.L) dropped 3.9 percent, Royal Dutch Shell (RDSa.L) shed 2.9 percent and gas producer BG Group (BG.L) lost 2.8 percent.
The FTSE 100 .FTSE ended down 87.6 points at 5,970.1, hitting its lowest close since mid-April, marking the first sub-6,000 close since then.
"We might see several hundred points off the FTSE over the next two or three months as a result of the resources stocks weakening," said Roger Cursley, a strategist at Investec.
"But actually that should lead into better economic prospects for 2009...Because lower inflation means the Bank of England can start thinking about cutting rates again," he added.
Both the dollar and U.S. stocks edged higher after a report showed more expansion than expected in the U.S. service sector last month.
Also spurring the dollar higher, Federal Reserve Chairman Ben Bernanke said the day before that the U.S. central bank would be reluctant to cut interest rates again because of dollar-led inflation.
Miners suffered with Vedanta Resources (VED.L) Kazakhmys (KAZ.L), Eurasian Natural Resources (ENRC.L) and Antofagasta (ANTO.L) all falling between 4.2 and 2.1 percent.
"I feel that the risk is on the downside, all the chartists are quite negative," Mike Lenhoff, chief strategist at Brewin Dolphin, said of the FTSE 100.
"I'd like to think we can hang onto that 6,000 level...but my guess is that if we do break decisively we're heading back to 5,500."
In the UK, the Bank of England is expected to leave rates unchanged at 5 percent when it announces its verdict on Thursday.
CONSUMER GLOOM
Also weighing on sentiment, a survey showed British consumer confidence fell further in May with people even gloomier about the state of the economy.
Kingfisher (KGF.L) and Home Retail (HOME.L) both fell about 2 percent.
Index heavyweight Vodafone (VOD.L) shed 5 percent after going ex-dividend.
British Airways (BAY.L) climbed 5.6 percent as lower oil prices gave airlines some reprieve.
Banks staged a mixed performance. Investors remained cautious of the sector after Lehman Brothers shares tumbled the day before on concern that it may need to raise more capital.
HBOS HBOS.L fell 3.2 percent, Standard Chartered (STAN.L) lost 2.9 percent and Barclays (BARC.L) ended 2.3 percent lower.
But Alliance & Leicester ALLL.L added about 3 percent. One trader cited a Daily Telegraph report which said the bank may be a target for private equity firms looking to build up stakes in banks looking to strengthen their balance sheets. (Additional reporting by Dominic Lau and Michael Taylor; editing by Elaine Hardcastle)
