The FTSE 100 was 30.57 points weaker at 3960.29 while the FTSE 250 lost 21.38 points to 6995.3 at around 12.27pm.
Insurance issues underperformed, amid concern about the possible scrapping of higher rate tax relief on pension contributions in the Budget, which is due to be unveiled tomorrow. Merrill Lynch said the move was likely to prove a negative for the likes of Standard Life, down 2.6 per cent or 4.8 at 182.1p, and Old Mutual, down 4.2 per cent or 2.5p at 57.3p, as its may lessen the attractiveness of pensions versus non-pensions savings.
“By limiting the tax relief to the basic rate, the tax break on new pension contributions for higher rate tax payers would effectively be halved – a higher rate tax payer currently effectively pays £60 for every £100 invested in a pension plan; this cost could rise to £80 if higher rate tax relief was scrapped,” the broker said,
“Given the bias to pensions and higher rate tax payers, we see St. James Place, Standard Life and Old Mutual (through Skandia) as potentially the most affected by the changes. Aviva, Legal & General and Friends Provident would also be affected, although we suspect these companies have less exposure to higher rate tax payers. Prudential writes very little pensions business in the UK.”
Retailers were firm, thanks to positive results from Tesco, which posted annual revenues of more than £1bn a week, and Associated British Foods, the owner of Primark, which beat analyst forecasts with a first half earnings report.
Tesco itself was 4.5 per cent or 14.8p stronger at 346.9p and AB Foods gained 5.6 per cent or 36.5p to 690.5p, while Home Retail Group, which owns the Argos and Homebase stores, climbed to 251.5p, up 0.5p, and J Sainsbury advanced to 308.75p, up 2.5p.
Miners remained weak as metals prices, which began to slacken at the beginning of the week, continued to slide. Xstrata, which was downgraded to “neutral” from “outperform” at Exane BNP Paribas, was amongst the weakest, losing 5 per cent or 26.5p to 498p, while Antofagasta lost 12p to 519.5p and BHP Billiton eased by 23p to 1320p.
Banks, undermined by the bleak outlook for bad debts in the previous session, were also lodged in the doldrums, with Standard Chartered falling to 910p, down 32.5p, and Barclays losing 8.25p to 200.75p.