Weaker HSBC stock outweighs mining sector gains as Footsie dips

FTSE: 5,994.01 (–7.19) Mid-250: 11,621.29 (+12.32) Small Cap: 3,239.14 (+1.98): LONDON SHARES ended lower yesterday, after weaker than expected earnings from HSBC undermined the banking sector.

HSBC reported that its full-year pre-tax profit had more than doubled to $19 billion, falling short of expectations of $20 billion.

The bank said it was profitable in every customer group and region for the first time since 2006, but investors were disappointed by the earnings miss. After opening gains, the shares fell 4.7 per cent to 678p by the close of trade.

The losses for HSBC and the banking sector weighed on the FTSE 100, which closed 0.1 per cent lower at 5,994.01 a loss of 7 points.

On the final trading day of February, the index was up 2.2 per cent on the month.

Pearson impressed investors with a jump in full-year earnings, gaining a bigger slice of its main education publishing market. The company, which also owns the Financial Times, raised its dividend 9 per cent to 38.7p a share. The shares gained 0.9 per cent to £10.51.

Miners and oil groups offered some support. The mining sector was buoyed by talk that Glencore, the world’s largest commodity trader, was preparing the ground for an initial public offering.

Glencore owns 34 per cent of Anglo-Swiss miner Xstrata and the cash raised – the US group is estimated to be worth more than $60 billion – from the IPO would enable the company to compete for deals with the biggest of the international mining groups, including BHP Billiton and Rio Tinto.

Xstrata was up 1.6 per cent at £14.04, while Eurasian Natural Resources, cited by some analysts as another potential target, was up 0.8 per cent at 965p.

BHP Billiton shares finished flat at £24.34.

Essar Energy, the India-based oil refiner, was the leader of the FTSE 100 after Credit Suisse awarded the company an “outperform” rating and set a target price of 600p, saying it offered “a strong growth profile”. Shares in Essar were up 3.5 per cent to 517p.

At the bottom of the FTSE 100, however, stood Associated British Foods, which fell 5.9 per cent to 966p after warning high sugar processing costs and a slowdown at Primark, its retail clothing outlet, would have a negative impact on its first half performance. – (Copyright The Financial Times Limited 2011)