FTSE down as U.S. sentiment weighs; BoE eyed
LONDON, Aug 1 (Reuters) - The FTSE 100 .FTSE of Britain's leading shares ended 1.7 percent lower on Wednesday as the U.S. credit crisis continued to weigh and as traders looked ahead to the Bank of England's (BoE) interest rate decision on Thursday.
The FTSE 100 ended down 109.5 points at 6,250.6, having earlier hit a session low of 6,187.2.
Subprime mortgage woes from the United States pushed numerous sectors deep into negative territory with banks, miners and oil companies hardest hit.
Top losers on the day included BHP Billiton (BLT.L), Xstrata (XTA.L), Rio Tinto (RIO.L), and Lonmin (LMI.L).
Among banks, Northern Rock NRK.L dropped 4.4 percent and HSBC (HSBA.L) shed 1.5 percent despite Citigroup raising the latter's rating to "buy" from "hold" and price target to 1,050 pence from 1,000 pence.
HBOS HBOS.L, Britain's biggest mortgage lender, dipped 2.8 percent. It unveiled a 13 percent jump in profits and its biggest dividend rise since it was formed six years ago but problems in its core UK retail unit hit its shares.
"It's the overnight news from the U.S. which has set the tone for the market all day," said Dresdner Kleinwort strategist Philip Isherwood. "We're really just waiting to see what the actual direction for the U.S is going to be. It's as good as it gets on the U.S."
"The story overnight was effectively driven by more bad news coming out of the U.S. housing sector both in terms of insurance companies ... and a mortgage provider unable to support their loans," Isherwood added. "Generally speaking, it is the extended credit in the U.S. housing market. The market doesn't like the risk."
Cadbury (CBRY.L), the world's biggest confectionery maker, topped the loserboard after it reported a drop in first-half profitability amid rising dairy prices and said the sale of its North American soft drinks business was still in the balance.
Cadbury said last week it was postponing the sale of its North American soft drinks business, whose brands include Dr Pepper, 7UP and Snapple, because of turbulent debt markets. Its share price lost 8.2 percent.
Hedge fund firm Man Group (EMG.L) fell 5.5 percent on the negative U.S. sentiment and after it said on late Tuesday that the net asset value of its closely watched AHL managed futures strategy fell 6.79 percent over the last week.
"The U.S. is providing a slow-motion example of what happens when higher interest rates start to hurt in an over-borrowed economy -- is the UK the same? It doesn't matter, very few markets are being able to ignore what is happening in the U.S."
On the economic agenda, the BoE started its two-day policy meeting and will announce its rate decision at 1100 GMT on Thursday. Economists see rates rising to 6.0 percent by the year end, but the majority do not see this happening in August.
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