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FTSE shrugs off UK budget, looks to Fed for a lead

LONDON: Britain's FTSE 100 closed on Tuesday little changed on the day and virtually unmoved from levels seen when Chancellor of the Exchequer Gordon Brown began his budget speech, with the market focused on events across the Atlantic.

The benchmark index ended 6.6 points down at 6,617.9 and was trading 11.1 points lower as Brown began to speak.

Tuesday's meeting of top Federal Reserve policymakers was the market's main focus, with a result expected at around 1915 GMT and forecast to produce a quarter percentage point rise in US rates to six percent.

Brown's budget was in the shade, strategists said.

"It's a fairly straight down the line package but overall it's testimony to the fact that the FOMC meeting is probably of more importance to the UK market than the UK budget," said Salomon Smith Barney equity strategist Robert Buckland.

Having touched a session low of 6,543.4, the FTSE got a big boost from a hundred-point rise on the Dow and a relatively resilient performance for Nasdaq which eased a half percentage point. Both indexes started the New York session a lot lower.

Turnover was a relatively subdued 1.6 billion shares.

Sectorally, TMTs slugged it out with 'old economy' stocks. Telecoms, media and technology stocks took more than 60 points off the FTSE while drugs, food and oil shares added nearly 40.

Decliners and gainers were perfectly matched.Economists and strategists said the principal effect on the market of the budget would be comforting confirmation that Brown's news on government gross domestic product (GDP) growth and Public Sector Net Borrowing forecasts was not going to affect interest rate expectations.

"This should help the exporters and interest rate sensitive sectors. The GDP and surplus forecasts give no reason for the (Bank of England's rate setting) Monetary Policy Committee to push rates higher than 6.5 percent or even 6.25 percent," said Charles Stanley chief economist Edward Menashy.

Sterling did indeed head lower against other major currencies after Brown unveiled his budget.On the downside, Brown did nothing on stamp duty tax on share trading whereas market expectations were that he would lower it or cut it altogether.

Earlier, on the UK economic front, February retail price data had scant effect on the market, meeting forecasts and offering little new news on inflation.

The figures showed that inflation edged higher but remained below the Bank of England's 2.5 percent target for the 11th month in a row.

Macroeconomics aside, newcomers to the blue chip FTSE index led the pack of losers, with biotech company Celltech the worst hit, falling 13.6 percent and Internet security firm Baltimore Technologies droping 12.6 percent. Psion , maker of hand held computers, lost 9.4 percent, while number one UK Internet service provider Freeserve dropped 9.7 percent.

The FTSE techMARK .FTT1X index dropped six percent.

Meanwhile on the new issue front, Internet investment firm Bizzbuild.com rose to 306 pence from its flotation price of 250 pence. And lastminute.com , the cut price on-line travel agency, fell below its 380p flotation price for the first time to close at 312-1/2p, down 18.3 percent.

But 'old economy' stocks made a big comeback.

Cadbury Schweppes put on 6.3 percent, ICI 6.1 percent, United Utilities 5.9 percent and Rentokil 5.7 percent.

Marks & Spencer had a particularly good day, rising 5.6 percent, after the embattled stores group revealed a steep rise in sales at one of its stores trialing a new customer profiling system.

Stores analysts said that the news was extremely positive for the stock. A laggard even in a deeply out-of-vogue retail sector, M&S has underperformed the FTSE All-Share by 43 percent over the last year, and lagged the sector by 10.6 percent.

But shares in British American Tobacco dived eight percent after the tobacco industry's latest US legal setback.

The FTSE 100 smaller brethren fared less well than the leading index. The FTSE Mid 250 fell 1.1 percent and the Small Cap index 0.9 percent.

But, Small cap stock Hogg Robinson starred with a 35 percent rise, after news of a rival bid to that from fund manager Active Value. Hogg said it was holding talks with a management team, which may lead to an offer for the company.-Reuters