By Michael Taylor
LONDON, May 22 (Reuters) - Britain's blue-chip share index
slipped back on Thursday during a volatile session as economic
worries saw bank stocks drag, while firmer metal prices buoyed
mining shares.
At 1120 GMT the FTSE 100 was down 7.1 points, or 0.1 percent
at 6,191.0. after hitting a high of 6,226.2.
Across the Atlantic, U.S. stocks overnight posted their
biggest losses in two weeks amid concern the economy there faces
1980s-style stagflation after the Federal Reserve slashed its
economic growth forecasts while raising estimates for inflation.
On the UK upside, positive broker comment and firmer metal
prices boosted mining shares, with Anglo American <AAL.L>,
Xstrata <XTA.L> and Rio Tinto <RIO.L> up by between 1 and 1.8
percent.
Oil stocks were mixed as U.S. crude prices hit
record-breaking levels at $133 a barrel. Heavyweight BP <BP.L>
tacked on 0.5 percent, while rival Shell <RDSa.L> lost 1
percent.
Beaten-down banks headed further south after Swiss bank UBS
<UBSN.VX> launched a deeply discounted rights issue worth 16
billion Swiss francs ($15.55 billion).
Barclays <BARC.L>, Lloyds TSB <LLOY.L> and HSBC <HSBA.L>
fell 0.8-1 percent.
Analysts at Keefe, Bruyette & Woods also said earnings in
the UK banking sector would suffer if banks were hit by credit
losses of the same magnitude as the early 1990s, with earnings
across the sector dropping some 75 percent and capital ratios
becoming "increasingly uncomfortable".
"The market has been quite volatile," said Jawaid Afsar, a
trader at Securequity in Sheffield. "You can see on the books
today that volumes are pretty thin and as soon as there is a
wave of selling traders are just pulling their bids."
"Short-term I can see (oil) coming to a level where
profit-taking is going to be coming in and it's going to be
quite swift. Traders have been caught short building their
positions and that's caused a spike -- there is no other
fundamental reason."
"The economic picture is getting gloomier," Afsar added.
"Things are a lot worse than they were a week ago."
Topping the FTSE 100 leaderboard however, Cadbury <CBRY.L>
rose more than 4 percent on renewed market speculation of a
takeover bid for the British confectioner, traders said.
Cadbury had no immediate comment.
Traders said U.S. investor Warren Buffett, Hershey <HSY.N>
and Kraft Foods Inc <KFT.N> were being mentioned as potential
suitors.
On the macroeconomic front, British retail sales showed
unexpected resilience in April, falling less than expected
thanks to a rush to buy computer games, official data showed on
Thursday. []
C&W EARNINGS RISE
British telecoms company Cable & Wireless <CW.L> rose 2.7
percent after it said it is considering a demerger of its two
divisions this financial year after beating forecasts with a 23
percent rise in annual underlying core earnings.
Vodafone <VOD.L> gained 2.4 percent as traders said the
stock was oversold in recent sessions.
Leading the downside, London Stock Exchange <LSE.L> shed 4.8
percent despite meeting forecasts with a 56 percent rise in
adjusted operating profit.
Traders voiced concerns it was lagging behind competitors,
adding the outlook was poor while the overall numbers themselves
were good but not great. []
Imperial Tobacco <IMT.L> was down 3.6 percent as traders
cited negative broker comment.
Tate & Lyle <TATE.L> shares slipped 2.7 percent to 472 pence
as analysts turned cautious on the outlook for the sugar refiner
and sweetener maker, especially its North American ingredients
business which is suffering from soaring corn prices.
Tate's annual pre-tax profits fell 11 percent due to losses
at its sugar trading arm and a weak dollar, but analysts are
concerned some of its businesses are hitting cyclical highs.
(Additional reporting by Dominic Lau and Rebekah Curtis;
Editing by Greg Mahlich)
