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FTSE ends lower after S&P downgrades Spain

Source: Reuters - Wed 28th Apr 2010

The top share index closed lower on Wednesday, extending the previous session's steep falls, after ratings agency Standard & Poor's cut Spain's credit rating to AA, overshadowing strong corporate earnings.

The FTSE 100 index closed down 16.91 points, or 0.3 percent, at 5,586.61, after it tumbled 2.6 percent on Tuesday - its biggest one-day percentage dip since late November - hit by credit rating downgrades by S&P for both Greece and Portugal.

S&P on Wednesday cut its ratings on Spain by one notch to AA from AA-plus, citing a more protracted period of sluggish growth than previously expected.

Banks on UK blue chip index were under pressure, with Barclays, Lloyds Banking Group and Royal Bank of Scotland off 1.5-1.9 percent.

But HSBC, which has a large presence in Asia, and emerging market-focussed Standard Chartered bucked the weak sector trend, trading flat and up 0.2 percent respectively.

"The UK is in some sense... isolated because it's not part of the euro zone, but make no mistake, this is something which is potentially going to wash up on the UK shores at some point," said Peter Dixon, economist at Commerzbank.

"As ratings continue to come under pressure, market sentiment remains volatile and I'm afraid that's going to impact upon all asset classes over the next few days."

Other financials were also hit by retreating risk appetite. Man Group, the world's largest listed hedge fund firm, and insurers Admiral Group and Aviva were 1 to 3.6 percent weaker.

Greece will receive much more aid than initially expected, German lawmakers said on Wednesday after a briefing with the International Monetary Fund.

Greece's share benchmark rose 0.6 percent. The country's securities regulator on Wednesday banned short-selling in shares on the Athens bourse until June 28.

UK-listed miners were lower along with metals prices, with Antofagasta, Eurasian Natural Resources and Vedanta Resources down 0.6-2 percent.


Energy stocks rose as Royal Dutch Shell, up 2.3 percent, continued a run of better-than-expected first-quarter profit rises by the big international oil companies on the back of higher oil prices, and boosted, in its case, by an unexpected return to production growth.

BG Group, which reports its first-quarter earnings on Thursday, grabbed the top spot on the blue chip leader board, up 3.9 percent, while BP added 2.5 percent, having posted a sharp rise in profits on Tuesday.

GlaxoSmithKline put on 0.3 percent as bumper sales of swine flu vaccine boosted the drugmaker's first-quarter earnings by 17 percent, more than expected, and it reassured investors it could absorb the cost of U.S. healthcare reform.

Peer Shire added 0.1 percent.

The U.S. earnings season stayed in high gear, with Dow Chemical Co reporting a profit that beat expectations.

Investors awaited the outcome of the latest U.S. Federal Reserve meeting, due at 1815 GMT after the London close. No change is expected to U.S. monetary policy.

ARM Holdings, Centrica, Reed Elsevier, and Tesco fell after going ex-dividend.

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