November 6, 2008 / 8:59 AM / 11 years ago

FTSE down 2.8% on commods, banks before BoE decision

* FTSE 100 falls 2.8 pct, led by commodities and banks * Bank of England to announce rate decision at 1200 GMT * Hedge fund Man Group slumps after H1 results

(For more on the financial turmoil, click on [nCRISIS])

By Dominic Lau

LONDON, Nov 6 (Reuters) - Britain’s top share index tracked a slide in the U.S. and Asian markets early on Thursday ahead of the Bank of England’s interest rate decision, down 2.8 percent, as fears of a deep and prolonged recession intensified.

Led by heavyweight commodity stocks and banks, the FTSE 100 .FTSE was down 124.73 points at 4,406.00 at 0839 GMT after losing 2.3 percent on Wednesday to snap a six-session winning streak. The index is still down nearly 32 percent for the year.

Energy stocks fell along with softer crude prices CLc1, which traded below $65 a barrel. BP (BP.L), Royal Dutch Shell (RDSa.L), BG Group BG.L, Cairn Energy (CNE.L) and Tullow Oil (TLW.L) lost between 1 and 3.5 percent.

Elsewhere in the commodity sector, miners came under pressure as metal prices slipped and after Vedanta Resources VED.L posted a 24.7 percent drop in first-half profit.

Vedanta shed 2.3 percent, while Anglo American (AAL.L), BHP Billiton BLT.L, Rio Tinto (RIO.L), Xstrata XTA.L, Kazakhmys (KAZ.L), Eurasian Natural Resources ENRC.L and Antofagasta (ANTO.L) sagged 2.2 to 7.1 percent. The Bank of England is widely expected to cut interest rates when its announces its verdict at 1200 GMT. The European Central Bank is also set to trim rates at 1245 GMT.

“Clearly the U.S. economy is in recession and we are probably heading in a similar direction in the UK. The focus has very much come back to some of the difficulties particularly on corporate earnings that we are going to face here,” said Richard Hunter, head of UK equites at Hargreaves Lansdown.

Hunter said the market had priced in a 50 basis point rate cut by the BoE.

“One would hope the market would not be too disappointed if it comes in half percent because increasingly over the last few days there have been calls on something more aggressive,” he said.

UK banks were down, with the FTSE 350 banks index .FTNMX8350 losing 4.8 percent. Within the sector, Barclays (BARC.L) sank 5 percent, Royal Bank of Scotland (RBS.L) fell 3.4 percent and HSBC (HSBA.L) dropped 5.6 percent.

U.S. stocks plummeted on Wednesday, a day after Barack Obama’s victory in the U.S. presidential election, as a fresh batch of dismal economic data underscored the massive challenges awaiting his administration.

In Asia, Japan's Nikkei average .N225 lost 6.5 percent.


Hedge fund Man Group (EMG.L) slumped 26 percent to top the FTSE 100 losers’ list after it said its pretax profit fell 24 percent to $662 million in the six months to end-September, due to a drop in performance fees and amortisation charges. [ID:nL5686840]

Also in the financials sector, private equity firm 3i Group (III.L) sank 9.6 percent after it said first-half revenues from company disposals were down 43 percent as the credit crunch had made it more difficult to sell companies in which it had invested. [ID:nL6325602]

RSA Insurance (RSA.L) eased 2.2 percent after Britain’s biggest commercial insurer posted an 11 percent rise in premiums for the first nine months of its financial year and reiterated a key profitability target for the full year. [ID:nL6726010]

Old Mutual OML.L, however, rose 3.7 percent despite reporting a 4 percent drop in its nine-month sales and saying it expects to reach a conclusion on the stalled disposal of its Mutual & Federal subsidiary before the end of the year. [ID:nL6189049]

Among other individual movers, Invensys ISYS.L sagged 6.9 percent despite the technology and controls group reporting a 12 percent rise in first half operating profit and saying it had strengthened its financial position. [ID:nL6361309]

International Power IPR.L advanced 1.8 percent after the power station operator said it expected 2008 to be another year of growth. [ID:nL656717]

Mid-cap Tate & Lyle (TATE.L) gained 2.8 percent after the sugar refiner and sweetener maker beat forecasts with a 4 percent rise in half-year profits and said it was more resilient than others to recession in the wider economy. [ID:nL4582374]

Editing by Mike Nesbit

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