US weakness offsets bank gains

HIGH hopes of robust results from Britain's part-nationalised banks later this week failed to keep the FTSE 100 higher yesterday as a weak start in New York pulled shares lower.

News that the chief executives of Royal Bank of Scotland and Lloyds Banking Group are to give up cash bonuses in the coming days came amid renewed optimism for the sector.

Barclays and French bank BNP Paribas last week issued better-than-expected results, boosting confidence for the sector.

RBS shares were among the best performing in the top flight yesterday, rising 1.25p to 35.78p, while Lloyds rose 2.3 per cent to 51.67p. Barclays, which last week reported a 92 per cent leap in pre-tax profits to 11.6 billion, climbed 4p to 316.25p.

Banks were the strongest performers in an otherwise slow session for the FTSE 100 of Britain's leading publicly quoted companies. They were ahead for most of the session, but a slow start in New York dragged the index down 6.1 points to close at 5,352.07. The mid-cap FTSE 250 closed up 10.35 at 9,441.71.

Mining companies were stronger as the dollar weakened, pushing metal prices up. Eurasian Natural Resources lifted 31p to 1,065p and Vedanta Resources cheered 76p to 2,630p.

Shares in oil companies drove the index higher early in the session as crude oil briefly rose above $80 a barrel on demand hopes. Eventually, however, oil pared some of the gains, pulling BP down 0.1p to 581.2p, while Cairn Energy fell 1.9p to 347.9p.

Outsourcing and distribution firm Bunzl was the biggest gainer in the FTSE 100, after reporting a 6 per cent increase in margins as well as higher profits for 2009. Shares closed up 25p at 678p, a rise of more than 4 per cent.

Investors turned away from retailers, despite stunning sales at Primark, which is owned by Associated British Foods. Shares in Next were the worst performers in the blue-chip index, falling 57p to 1,884p, while Marks & Spencer dropped 8.4p at 334p.

Associated British Foods briefly hit its highest level in almost three years, but shares closed down 3p at 934p as traders took profits after a strong recent run.

Pharmaceutical firms were largely given a cold shoulder by investors as traders looked for higher-risk investments.

GlaxoSmithKline dropped 31.5p to 1,203.5p, with its shares also hit after news that a US drug reviewer recommended that Avandia, its treatment for diabetes, should be pulled from the market.

Rival Astrazeneca slipped 20p to 2,810p, but Shire Pharmaceuticals bucked the trend, closing up 10p at 1,380p.

Among the small-caps, Mouchel, the infrastructure services group, fell after Babcock International confirmed that its interest in VT Group did not extend to it.

Hours before Babcock said it had made an approach for VT, Mouchel confirmed that it was mulling an approach from VT. Shares in Mouchel dropped 2.9 per cent at 226p on fading takeover hopes.

Mid-cap VT Group rose 11.5p to 660p on reports that any bid would need to be at least 750p-a-share before its board of directors would open the company's books to a predator, while Babcock slipped 7.5p to 543p.

On Aim, Desire Petroleum, the exploration company focused on a basin to the north of the Falkland Islands, rose as much as 10 per cent on news that the Ocean Guardian drilling rig had arrived from the North Sea, before shares retreated late in the day.

A drilling campaign has stoked tensions with the Argentine government, which continues to claim sovereignty over the islands. Shares closed down 3.6 per cent at 112.75p.