FTSE treads water as positive Financial stocks counter weaker miners

The FTSE remained relatively unchanged in early trading Tuesday morning due to strength in financial stocks being countered by weakness in the mining sector.

At 9.30am GMT the FTSE was trading +4 points at 6064 with good numbers from Barclays seemingly fending off lower mining prices following overnight Chinese inflation data.

Barclays, the British banking stalwart, provided investors with reason to celebrate this morning as it released results showing net profit rose by 36%. Barcap, the group’s investment banking arm, also confirmed a 94% increase in pre-tax profit. Bob Diamond, Barclays CEO, however did add a note of caution stating that tougher regulations may hinder future returns and the group will look to streamline operations. At 9.40 GMT Barclays was trading +8.85p at 319.45p (+2.8%), with a high early in the session of 320.6p. The positive results also helped to buoy sector stable mates as Lloyds traded up +2.4% with RBS up around 0.75%.

UK mining stocks weighed heavily on the FTSE in early trading as China confirmed that inflation accelerated in January, giving investors more reason to anticipate another bout of Chinese tightening. Consumer prices rose 4.9% in January from a year earlier, following a 4.6% rise in December. With seemingly no let up in inflationary pressure, investors are beginning to position themselves for future Chinese rate hikes and have begun to unwind long positions in mining stocks, even ahead of ‘better-than-expected’ results due out from BHP Billiton tomorrow morning. Shortly after 9.30 GMT the UK mining sector was trading down -1.8%, with Antofagasta (-3.2%), Kazakhmys (-2.6%) and Xstrata (-2.4%) leading the way; closely followed by larger than 1% losses for most sector constituents.

Also helping to peg back equity markets were earlier GDP numbers from France and Germany. German GDP grew less than forecast for the fourth quarter at +0.4% (expected at +0.5%), with French GDP confirmed at +0.3% (expected at +0.6%). At 9.30am GMT the DAX was trading +14 points at 7411 with the CAC 40 at 4110, +13 points.

With inline UK inflation data released at 9.30 GMT, and with the current battle between financial and mining stocks, it appears that the market will not be attempting any move of conviction before being given direction from the US market. Investors may anticipate a tight trading range ahead of US macro data, due out at 1.30pm GMT this afternoon.