FTSE retreats as China inflation concerns resurface

Published 04/14/2011, 04:46 AM
Updated 04/14/2011, 04:48 AM
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* FTSE falls 0.5 percent

* Miners retreat ahead of China data on Friday

* Reckitt slips as CEO retires

By David Brett

LONDON, April 14 (Reuters) - Britain's top share index swung lower on Thursday, as concerns over Chinese inflation moved back into focus, and Reckitt Benckiser fell sharply as it announced the shock retirement of its star chief executive.

British consumer goods group Reckitt Benckiser fell 7.7 percent after the firm said Chief Executive Bart Becht is to retire, six months after the departure of its chief financial officer.

"It was one of the most highly regarded management teams, I would have said, in the FTSE," Martin Dolan, an analyst at Espirito Santo, says.

"The fact that they've both gone now I think is basically going to cause some people to reassess (the situation)."

By 0910 GMT, the FTSE 100 was down 30.46 points, or 0.5 percent, at 5,979.98, having closed 0.8 percent higher at 6,010.44 in the previous session.

Miners fell along with base metal prices as investors shied away from riskier assets. Analysts cited concerns over Chinese inflation.

"(Chinese inflation) might well be a focus. Overnight the Asian markets were tangibly cut and we saw interest rate policy in likes of Singapore increase, which may have add a little to nerves as we wait for those Chinese inflation (and GDP figures on Friday)," said Keith Bowman, analyst at Hargreaves Lansdown.

Chinese inflation in March accelerated to 5.4 percent from a year earlier, Hong Kong media said on Thursday, which will add weight to the government's vow to rein in price rises.

Economists polled by Reuters had expected annual inflation in March to be 5.2 percent, up from February's 4.9 percent.

"For the coming months we expect increasing volatilities in cyclical sectors with a more selective and less steady performance trend," analysts at Unicredit said in an equity strategy note, citing the impact of China's inflation and growth concerns.

In the resources sector, commodities trading giant Glencore published details of long-awaited plans to raise up to $12.1 billion in a London and Hong Kong offering.

BANKS RETREAT

Banks, Wednesday's top performers after JP Morgan results helped boost confidence, retreated as investors locked in profits on a sector still dogged by regulatory uncertainty.

Lloyds Banking Group shed 1.1 percent as Barclays Capital cut its target price and kept its "underweight" rating on the bank, saying the UK's Independent Commission on Banking's stance on Lloyds "will further dilute returns".

On the upside, Intercontinental Hotels rose 1.2 percent with traders citing a bullish note from Morgan Stanley.

Oil services firms AMEC, Wood Group, and Petrofac rose up to 0.6 percent as Unicredit initiated coverage on all three companies with "buy" ratings.

Unilever climbed 0.7 percent as French peer Danone released a strong first-quarter update.

Retailer Marks & Spencer rose 0.7 percent as the beleagured retail sector got a shot in the arm after broadly upbeat updates from WH Smith, Debenhams and Ideal Shopping Direct.

(Additional reporting by Brenda Goh and Tricia Wright. Editing by Jane Merriman)

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