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LONDON (Alliance News) - Stocks in London were lower Thursday midday, with resource companies and banks having different fortunes after the minutes from the Federal Reserve released on Wednesday suggested that a US interest rate hike in June is a real possibility.

The FTSE 100 was down 1.4%, or 83.28 points, at 6,082.52. The FTSE 250 was down 0.7% at 16.757.54 while the AIM All-Share was flat at 725.19 points.

The Fed minutes from the April 26-27 meeting showed "most" participants in the Federal Open Market Committee "judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the committee's 2% objective, then it likely would be appropriate for the committee to increase the target range for the federal funds rate in June."

"A few" Fed members considered it "appropriate" to raise US interest rates already last month, according to the notes of the meeting. The rising labour force participation rate has increased while the pool of available workers is shrinking, the minutes noted.

Several Fed members, who come from around the country, reported in the meeting that businesses in their regions "had seen a pickup in wages, shortages of workers in selected occupations, or pressures to retain or train workers for hard-to-fill jobs."

Stocks in New York closed flat to higher on Wednesday. On Thursday, the Dow 30, S&P 500 and Nasdaq 100 indices all were called down 0.3%.

The dollar strengthened against other currencies after the minutes release, consequently dragging on commodities prices. Gold was quoted at USD1,254.48 an ounce Thursday midday, compared to USD1,272.11 at the London equities close Wednesday.

Brent oil was at USD47.80 a barrel at midday, against USD49.54 a barrel at the close Wednesday. The North Sea benchmark had set a new 2016 high on Wednesday at USD49.81.

On the London Stock Exchange, miners were leading blue-chip decliners Thursday, with the FTSE 350 Mining sector index down 8.3%. Anglo American was off 5.7%, Fresnillo down 5.3% and BHP Billiton down 4.7%.

Oil producers also were among the worst performers, with Royal Dutch Shell 'A' shares down 5.0% and BP down 2.0%.

The dollar rose against the pound following the minutes, but sterling recovered almost all the ground lost after better-than-expected UK retail sales data, released Thursday morning in London.

The pound had stood at USD1.4632 ahead of the minutes on Wednesday and declined to a low of USD1.4560 afterwards. However, it was quoted at USD1.4626 at midday Thursday.

Data from the Office for National Statistics showed UK retail sales volume climbed 1.3% in April from March, when it decreased 0.5%. Sales were expected to grow only 0.6% month-on-month. On a yearly basis, growth in sales accelerated to a three-month high of 4.3% from 3.0%. Economists had forecast a 2.5% increase.

Sales excluding auto fuel rose 1.5%, offsetting a 0.7% fall in March and bigger than the expected increase of 0.7%. Excluding fuel, sales grew 4.2% annually, faster than the 2.6% increase seen in March and a 2% rise forecast by economists.

Travel stocks were suffering after an Egyptair passenger plane flying from Paris to Cairo with 66 people on board crashed in the Mediterranean Sea, officials in the Egyptian Ministry of Civil Aviation said. TUI Group was down 2.7% and Intercontinental Hotels Group was down 2.3%.

Tour operator Thomas Cook was the worst performer in the FTSE 250, down 17%. As the news of the Egyptair flight emerged, Thomas Cook reported a narrowed pretax loss in the first half of its financial year although revenue slipped, and it warned on the outlook for its full year due to reduced demand for Turkey and Belgium..

Elsewhere in London, Royal Mail shares were down 3.6%. The FTSE 100-listed postal service reported a sharp fall in annual pretax profit as it pursues its business transformation plan. The group pushed up its dividend as it said it had delivered a resilient performance within a challenging market.

Royal Mail's full-year results were slightly ahead of consensus, but analysts were cautious on the company, with Cantor Fitzgerald citing a lack of clarity in the group's outlook and Liberum seeing short- and long-term risks.

Among the few gainers in the FTSE 100, 3i Group was the best blue-chip performer, up 3.7%. The private equity investor said it delivered a higher total return and net asset value per share for the year to the end of March as it continued its momentum in realising value from its assets.

Meanwhile, as the hawkish minutes from the Fed hit London-listed resource stocks, the prospect of a June US rate hike boosted banking stocks, with Royal Bank of Scotland Group up 2.5% and Barclays up 2.4%. Higher interest rates can benefit banks' net interest margins, a key driver of profit.

RSA Insurance Group and Admiral Group also were in the green, up 1.8% and 1.3%, respectively. Both general insurers were upgraded by JPMorgan, with RSA lifted to Overweight from Neutral and Admiral upped to Neutral from Underweight.

Following the Fed minutes on Wednesday, the European Central Bank releases Thursday at 1230 BST the accounts of its monetary policy meeting held on April 21.

Stocks in Europe were lower, with the CAC 40 in Paris down 0.7% and the DAX 30 in Frankfurt down 1.1%. In Asia, the Japanese Nikkei 225 index ended flat, as did the Chinese Shanghai Composite. The Hang Seng index in Hong Kong fell 0.7%.

Still in the economic calendar Thursday, US Chicago Fed national activity index is due at 1330 BST, as well as initial and continuing jobless claims and the Philadelphia Fed manufacturing survey. The US Conference Board leading indicator is due at 1500 BST, while EIA natural gas storage is at 1530 BST.

By Daniel Ruiz; danielruiz@alliancenews.com

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