By Michael Taylor
LONDON, May 21 (Reuters) - Britain's blue-chip stock index
traded flat by mid-session on Wednesday as rising energy prices
gave commodity shares a bounce, but hawkish Bank of England
(BoE) minutes weighed on banks.
At 1132 GMT the FTSE 100 <> had edged up 3.4 points, or
0.1 percent to 6,195 in volatile trading and after shedding 2.9
percent in the previous session in its biggest one-day fall in
two months.
The BoE minutes showed that policymakers voted 8-1 to hold
interest rates at 5 percent this month, as most members were
worried that lowering rates from 5 percent would make it harder
to control inflation expectations, given a shock spike in
consumer price inflation to 3 percent in April. []
On the upside, oil shares rebounded and accounted for a
massive 49 positive index points, aided by U.S. crude prices
<CLc1> which hit $130 a barrel.
BP <BP.L> advanced 3.1 percent, Royal Dutch Shell <RDSa.L>
added 4.4 percent, BG Group <BG.L> climbed 4.3 percent and Cairn
Energy <CNE.L> tacked on 4.5 percent.
"The market had a huge correction yesterday," said David
Battersby, stockbroker at Redmayne-Bentley. "I'm still a huge
bull of the commodity story."
"The oil price rising as it is, is a huge benefit ...
because the more it becomes costly, the more cost-efficient it
is to look at alternatives."
Inflationary concerns helped boost precious metal prices, as
miners rose after profit-taking hit the sector on Tuesday.
Kazakhmys <KAZ.L>, BHP Billiton <BLT.L> and Rio Tinto <RIO.L>
added 0.2-2.2 percent.
Vedanta Resources <VED.L> was 2.3 percent higher after UBS
raised its price target on the stock to 3,100 pence from 2,600
pence with a "buy" rating.
Beaten down banks dragged after the BoE's hawkish minutes as
hopes for interest rate cuts diminished. Royal Bank of Scotland
<RBS.L>, HBOS <HBOS.L> and Barclays <BARC.L> lost between 2.3
and 4 percent.
"People are thinking we are out of the (credit crunch)
woods, and I don't think we are," said Battersby. "We are at the
point where banks are admitting what the problems are and are
doing something about it."
"It would be a big shock if (banks) realise there is a
problem, are dealing with the problem ... (but) it's not
enough."
In other macro news, British house prices are expected to
drop 7 percent this year and there is likely to be a 35 percent
slump in property market transactions, according to revised
forecasts from the Council of Mortgage Lenders.
In individual stocks, British energy services provider John
Wood Group <WG.L> was up 3.4 percent after Goldman Sachs raised
its price target to 440 pence from 410 pence with a "sell"
rating.
Credit information firm Experian <EXPN.L> was in and out of
positive territory. It climbed 1.4 percent after a 15 percent
rise in full-year operating profit came in just ahead of
forecasts but it warned market conditions remained turbulent and
announced plans to cut more costs. []
British building materials group Wolseley <WOS.L> was also
volatile, down 1.2 percent after it reported a 30 percent fall
in nine-month profit, in line with its first-half performance,
but said UK markets had slowed sharply in recent weeks.
[]
The stock initially rose at the opening, with traders citing
a positive note from Deutsche Bank and because the company did
not announce a rights issue in its update.
Also on the downside, HSBC <HSBA.L>, Unilever <ULVR.L>,
International Power <IPR.L>, Home Retail Group <HOME.L>,
Carnival <CCL.L>, Amec <AMEC.L> and Sainsbury <SBRY.L> all fell
after going ex-dividend.
(Additional reporting by Dominic Lau; Editing by Quentin Bryar)
