By Simon Kennedy
LONDON (MarketWatch) -- The U.K.'s benchmark index dropped
sharply Tuesday after mining and financial stocks came under
pressure, as speculation escalated as to whether Ireland will
accept a bailout.
A handful of mid-cap shares, however, posted gains after
well-received trading updates.
The FTSE 100 index fell 1.7% to 5,722.56 in afternoon trading.
Worries over a potential interest-rate hike in China weighed on
commodity prices and mining stocks.
Xstrata PLC dropped 3.8%, Rio Tinto PLC (RIO) declined 3.7% and
Kazakhmys fell 5.2% as all the mining stocks in the benchmark index
traded in the red Tuesday.
Bank stocks also weighed on the FTSE as uncertainty over a
potential bailout of Ireland continued to concern investors.
Shares in Lloyds Banking Group PLC (LYG) slumped 3.6% and
Barclays PLC (BCS) dropped 2.6%.
Several companies reporting earnings and trading updates had a
better session. House builder Taylor Wimpey PLC rose 2% after it
said profit would be towards the top end of its expectations and
added that it has agreed the terms of a new credit facility with a
group of lenders.
While the company didn't release details of the new borrowing
facility, Deutsche Bank analyst Glynis Johnson said the interest
rate the group is paying is likely to have fallen significantly to
around 8% from 11%.
The results "have reinforced our view of strong margin
improvement to 2013 driven by the substantial land write-downs and
cost savings," Johnson said.
Shares in rival Persimmon gained 0.8%.
TalkTalk Telecom Group PLC was another mid-cap riser, adding
4.8% after reiterating its guidance and saying it's targeting a 20%
margin over the medium term.
Jefferies International analyst Jerry Dellis said the margin
guidance is significantly better than the 16% consensus forecast
and was the "key positive" factor in the results.
He said the guidance suggests there is around 25% upside to the
consensus forecast for earnings before interest, taxes,
depreciation and amortization in three to four years.
On the downside, shares in Punch Taverns PLC dropped 7.9% after
the firm said its Finance Director Phil Dutton will leave the
company next year.
Low-cost airline easyJet PLC dropped 4.1% even after saying
pretax profit for the year jumped to 154 million pounds ($247
million) from £54.7 million and that it expanded its fleet by
24 aircraft, which will give it a total of around 220 aircraft by
September 2013.