February 21, 2018 / 10:33 AM / a month ago

Falling oil, rising yields weigh on UK shares

(For a live blog on European stocks, type LIVE/ in an Eikon news window)

* FTSE 100 down 0.3 pct

* Lloyds, Glencore rise after results

* AA plunges after saying it will pay lower divis

By Kit Rees

LONDON, Feb 21 (Reuters) - Strong results from Lloyds, Glencore and others were not enough to keep Britain’s FTSE 100 out of negative territory on Wednesday as energy stocks tracked oil prices lower and rising bond yields put pressure on big dividend payers.

An unexpected gain in the UK unemployment rate put pressure on sterling and gave a brief boost to companies that are big foreign currency earners.

But the FTSE resumed its decline to stand down 0.28 percent at 1000 GMT, with consumer staples and healthcare stocks leading the way down.

Mining giant Glencore jumped 2.4 percent after full year results that its CEO Ivan Glasenberg hailed as the strongest on record thanks to a rally in commodity markets and cost cuts.

In line with other miners reporting this month, Glasenberg said there were “emerging inflationary pressures,” but these had been offset so far by strong prices for byproducts, such as cobalt, and Glencore was containing costs.

Lloyds jumped around 2 percent after reporting record profit of 5.3 billion pounds, its strongest results since the bank was laid low by the 2008 financial crisis. It announced a share buy-back of up to a billion pounds and plans to spend another 3 billion on strategic investments.

“Last year the government sold its final stake in the formally bailed-out institution, and now we are seeing further proof the bank can stand on its own two feet,” said David Madden of CMC Markets UK, pointing to Lloyds’ strong cash flow.

The reaction to Lloyds results was a stark contrast to Tuesday’s 3 percent decline in peer HSBC, which offered less clarity on share buybacks and said it needed more capital.

Aside from energy stocks, consumer staples and health firms were among the biggest sectoral fallers as worries around rising bond yields persisted, with the U.S. two-year treasury yield reaching its highest since September 2008.

These industries are sometimes referred to as “bond proxies” given their generally reliable income streams and rising yields can make their dividend streams less attractive to some investors.

Britain’s mid-cap index was hit particularly hard by a number of large individual falls, retreating 0.4 percent.

AA plummeted more than 23 percent to an all-time low after the roadside recovery group and insurer forecast lower core profit and said it planned to pay lower dividends.

Firstgroup dropped more than 10 percent after the transport company downgraded its forecast for annual core earnings, saying its U.S. coach and bus services were affected by severe snowstorms in January.

Metro Bank declined 6 percent after its annual earnings. (Editing by Tom Pfeiffer and Richard Balmforth)

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