FTSE closes lower on economic gloom, grim results

Britain's top share index closed 0.8 per cent lower yesterday, weighed by mostly grim blue chip corporate news and a gloomy economic backdrop which hit metal prices and mining stocks.

The FTSE 100 index ended down 32.02 points at 4,202.24, retreating after a 0.5 per cent gain on Wednesday.

Mining stocks took the most points off the index with metal prices under pressure on fears for the outlook for the global economy.

"A lot of it stems back to demand issues and that's hurting the miners, and with their heavy weighting, the index tends to move in the same direction as the resources stocks," said Richard Curr, head of trading at Blue Index.

Antofagasta, Anglo American and BHP Billiton fell between 2.8 and 3.9 per cent.

Rio Tinto shares vacillated wildly, falling as much as 18 per cent at one point, after accompanying quarterly earnings news with confirmation that Chinese state-owned aluminium group Chinalco will invest $19.5 billion in it.

They rallied by the end of the day, closing down 1.5 per cent.

The global miner said it will sell $12.3 billion in asset stakes to Chinalco and raise a further $7.2 billion by issuing China's state-owned aluminium maker convertible notes to cut debt.

Energy stocks ended little changed, recovering from losses earlier in the session, as they shrugged off a fall in crude to around $35 per barrel. BP was down 0.2 per cent and Royal Dutch Shell was off 0.1 per cent.

Telecoms firm BT Group was the biggest blue chip faller, down 7.8 per cent after its pre-tax profit crashed 81 per cent in the third quarter due to problems at its global network services unit, while its pension swung to a big deficit.

Drinks group Diageo dropped 3.3 per cent after it reported half-year earnings at the top of forecasts, with a 26 per cent rise, but cut its profit growth target due to the global economic slowdown.

Property companies were hit after British Land announced plans to raise £740 million of equity through a rights issue it hopes remove the risk of a financial covenant break.

British Land fell 5.6 per cent while Hammerson slid 4.3 per cent and Land securities slipped 4.4 per cent.

Inter-dealer broker ICAP was the top FTSE 100 riser, up 7.3 per cent after a reassuring trading update. ICAP said its underlying full-year profit should be within market forecasts after its third-quarter revenue rose 20 per cent.

Medical device maker Smith & Nephew added 7.3 per cent, after it reported full-year sales and earnings broadly in line with forecasts, allaying fears of cash-strapped patients delaying orthopaedic procedures.

Away from corporate news, Wolseley added 5.7 per cent after Citigroup raised its rating for the plumbing supplies firm to "buy" from "hold".

Banks were mixed after the grilling of their bosses by the UK Treasury Select Committee ended on Wednesday. Government officials were quizzed yesterday about the troubled sector.

Regulators should be given the power to penalise banks that pay bonuses to reward short-term deal-making rather than long-term performance, British Prime Minister Gordon Brown told the parliamentary committee yesterday.

Lloyds Banking Group, Royal Bank of Scotland and HSBC added 1.2 to 4 per cent while Standard Chartered and Barclays fell 1.1 per cent and 3.2 per cent respectively.