Rio Tinto drop pins back UK's FTSE

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Britain's top shares ticked higher on Thursday but gains were limited by a drop in mining heavyweight Rio Tinto on shock news that its CEO is to quit and its 2012 results will be hit by a massive charge.

Rio Tinto fell 2.8 percent, alone chopping nearly 5 points off the FTSE 100 index, as the global miner said its chief executive Tom Albanese would step down, to be replaced by Iron Ore unit Chief Executive Sam Walsh. The firm also said it would take a $14 billion non-cash impairment charge in its 2012 results due to problems in Mozambique and aluminium assets.

Volume in Rio shares was at almost 100 percent of its 90-day daily average in the first hour of trading, way above the index total of about 10 percent.

Liberum Capital nevertheless reiterated its “buy” rating on Rio Tinto.

“Rio appears to be taking the front foot on write downs and appears to have been more proactive on culpability - launching management changes and cost cutting before the market has asked for it,” Liberum said in a note.

“Sam Walsh is the logical replacement for Albanese and has a strong operational heritage and may be more focussed on iron ore growth, which the market will like.”

The miners' overall fall of 1.3 percent knocked more than 8 points off the FTSE 100 index, the sector extending declines from the previous session as investors cautiously await GDP data due on Friday from top metals consumer China.

But the blue chip index managed to tick higher thanks to a rally in the banking sector, up 0.8 percent following recent declines, with investors awaiting more Q4 earnings from their US peers.

Citigroup and Bank of America Corp. are scheduled to post numbers on Thursday, after both JPMorgan Chase and Goldman Sachs beat forecasts on Wednesday.

“We are continuing to consolidate the strong New Year gains as we wait for fresh direction from corporate earnings. The initial news, especially from the US banks has been good, but there is still much more to come and investors don't want to get carried away,” said Mike Mason, senior trader at Sucden Financial Private Clients.

At 11:07 SA time, the UK blue chip index was up 4.91 points, or 0.1 percent at 6,108.89, holding above the key 6,100 level after falling 0.2 percent on Wednesday.

The blue chip index has gained around 3.5 percent since the start of 2013.

HIGH STREET FOCUS

Associated British Foods was the biggest FTSE 100 riser, up 4.4 percent after it said group revenue in the 16 weeks to January 5 was 10 percent ahead of last year, driven by a higher-than-expected 25 percent increase in sales at high street clothing retailer Primark.

There was also good news on the high street from Home Retail Group. Britain's biggest household goods retailer topped the FTSE 250 leader board with a 13 percent leap as it raised its full-year profit expectations after posting a 2.7 percent rise in third quarter sales at its Argos business.

Bank of America Merrill Lynch increased its 2013 and 2014 pretax profit forecasts for Home Retail by 7-8 percent, raised its target price to 155 pence from 130 pence, It repeated its “buy” rating, noting that Home Retail remains one of the more shorted stocks in the sector and had 12 broker “sell” ratings.

Seymour Pierce, however, trimmed that number by upgrading its rating for Home Retail to “hold” from “sell”.

Volume in Home Retail shares was nearly one-and-a-half times its 90-day daily average in the first-hour of trade.

Elsewhere on the high street, Europe's second-biggest electrical goods retailer Dixons Retail fell 0.9 percent, and British baby and maternity products retailer Mothercare shed 3.7 percent, as Christmas sales updates disappointed. - Reuters


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