By Steve Goldstein
U.K. banks rallied on Friday, with a rise in mortgage approvals
giving a modest boost to confidence, but losses from the mining
sector dragged the top index to a lower close.
Barclays rose 5.8% and the Royal Bank of Scotland added 4.8% to
conclude a wild week in the banking sector.
Approvals rose to 31,000 in December from 27,000 in November,
though it still was the second-worst figure in history. Total net
lending also rose.
"If these data continue to show an improvement in the flow of
credit then this is tentative good news," said Alan Clarke, an
economist at BNP Paribas.
After a volatile session, the FTSE 100 closed down 1% to
4,149.64, as markets took in a mixed reaction to economic data from
the U.S.
Elsewhere, property stocks were in favor as Morgan Stanley urged
switching to U.K. ones from Continental European groups. Land
Securities rose 8.8% and Hammerson added 4.5%.
Rio Tinto shares initially rallied in London on Friday as the
mining giant was able to take a step toward cutting $10 billion of
debt by selling iron ore and potash assets to Brazil's Vale for
$1.6 billion. But they eventually closed down 2.8%.
Coming on the heels of Xstrata's $5.9 billion rights offer, Rio
(RTP) said the deal "demonstrates the depth and quality of our
asset portfolio and our ability to unlock value for shareholders
despite tough credit markets and economic conditions."
Analysts at Canaccord Adams said the ore was sold for 8.5 times
estimated earnings before interest, tax, depreciation and
amortization this year -- vs. the 1.9 times that Rio trades on.
They are located near Vale's Ucrum iron ore and manganese
operations, however, which benefits the Brazil firm.
Rio Tinto hadn't approved the potash project so the assets were
carried on its balance sheet at $33 million.
Xstrata shares fell 11.8% and BHP Billiton dropped 7.5%.
Besides the miners, Shell also was a drag, falling 3.9% a day
after its mixed report of a $2.8 billion loss but an increase in
dividend.
AstraZeneca (AZN) wavered between gains and losses after
Thursday's 6.3% fall from its flat sales outlook. It finished down
0.3%.
Deutsche Bank upgraded the stock to buy from hold, with the
broker saying the sell-off was overdone. But Citigroup cut the
stock to hold from buy on the group's outlook.
Outside the FTSE 100, Henderson Group rallied 21% as it reached
a deal to buy rival New Star Asset Management , the debt-laden U.K.
fund manager, for 115 million pounds.
"A neat deal by Henderson, it should give them in excess of 50
million pounds of relatively stable revenues and enhance earnings
even after the 31 million pounds of restructuring costs," said
analysts at Evolution Securities.
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