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FTSE flat; banks, pharmas offset gains in commods

Reuters - Wednesday, May 7

Thomson Reuters fell 3.4 percent after a trader said Morgan Stanley had placed 2.6 million shares in the company at between 15.15 and 15.25 pounds per share. Morgan Stanley declined to comment. (Additional reporting by Rebekah Curtis and Michael Taylor; Editing by David Hulmes) - LONDON, May 6 - Britain's top share index ended flat on Tuesday as gloom in banks and pharmaceuticals offset gains in miners and oil shares which rode on the coat-tail of higher commodity prices.

The FTSE 100 closed down 0.3 points at 6,215.2, well off its day's low of 6,155.9. The UK's blue-chip index advanced nearly 7 percent last month -- its best monthly performance in five years, but is still down 3.7 percent for the year.

"The first thing we are looking for in terms of future gains is a period of consolidation for major indexes up at these kind of levels," Tim Hughes, head of sales trading at IG Index, said.

"If this can be achieved, if the gains aren't given back on the back of downbeat sentiment in the financial sector for instance, then you would imagine equity markets are going to a better place looking forwards," he said.

"A lot continues to depend on whether there are more shocks to come from big banks."

Banks shaved 10 points off the FTSE 100 on concerns of further problems in the sector amid a global credit crisis.

Lloyds TSB shed 3 percent after its steady trading update and reassurance over capital strength was overshadowed by wider concerns for the banking sector and writedowns.

Swiss bank UBS axed 5,500 jobs and sold billions of dollars of ailing assets in a bid to break free from the subprime crisis. [ID:nL06313489]

Barclays , Royal Bank of Scotland , HSBC and Alliance & Leicester were down between 0.1 and 1.5 percent.

The Bank of England will announce its interest-rate verdict on Thursday.

Drugmakers also took a beating, with Shire losing 4.6 percent. Credit Suisse said Shire's biggest hope, Vyvanse, a medicine for attention deficit hyperactivity disorder, was not capturing as big a market share as expected according to weekly IMS data.

AstraZeneca dropped 2 percent after saying a European patent covering the use of its Symbicort medicine as a treatment for chronic obstructive pulmonary disease had been revoked.

GlaxoSmithKline was also down 2 percent. The company planned to sell a $6 billion, three-tranche bond, one of the banks managing the sale said.

TULLOW MAKES DISCOVERY

Tullow Oil spurted some 24 percent after the explorer said its well offshore of Ghana had hit a significant column of light oil, indicating its Jubilee field is bigger than thought. [ID:nL06900257]

Elsewhere in the sector, Cairn Energy put on 4.9 percent, BG Group added 7.1 percent and heavyweight Royal Dutch Shell rose 0.8 percent.

Miners were the another standout performers, with Rio Tinto , BHP Billiton , Vedanta Resources , Kazakhmys and Xstrata up 2.7 to 4.9 percent.

Capita Group strengthened 3.3 percent. Britain's biggest back-office outsourcing firm said it had performed strongly in the first four months of 2008 and revenue growth across the group was very encouraging.

Property counters suffered after Morgan Stanley issued a downbeat note on the sector.

The broker also cut its rating on British Land to "underweight" from "overweight" and downgraded Land Securities to "underweight" from "equal weight", while trimming its price targets on Hammerson and Segro .

British Airways lost nearly 4 percent after the airline said a decline in the number of economy-class travellers was largely behind a 7 percent decline in passenger figures in April.

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