LONDON MARKETS: FTSE 100 Rises; Investors Turn Sights On Budget, Fed

By Carla Mozee, MarketWatch

Sainsbury shares turn lower

LONDON (MarketWatch) -- U.K. stocks rose Tuesday, with gains for the benchmark FTSE 100 coming in ahead of key policy announcements from the U.K. and the U.S.

The FTSE 100 rose 0.5% to 6,837.61, as shares of natural-resources producers ticked up and utilities pushed higher, led by a 5% surge in shares of British Gas parent Centrica PLC . The FTSE's move added to Monday's jump of 0.9% for the blue-chip index. (http://www.marketwatch.com/story/ftse-100-gains-but-crh-shares-drop-in-london-trade-2015-03-16)

Stocks traded in London managed to outperform equities in the broader European market which fell following Monday's rally (http://www.marketwatch.com/story/european-stocks-take-a-step-back-from-rally-mode-2015-03-17), as well as U.S. stocks (SPX), which dropped as the Federal Reserve began its policy meeting (http://www.marketwatch.com/story/us-stocks-futures-dip-as-pre-fomc-jitters-start-to-seep-in-2015-03-17). The Fed will announce its policy decision on Wednesday, and there is concern the central bank will indicate it'll begin raising interest rates this summer.

Also on Wednesday, U.K. financial chief George Osborne will present the government's 2015 budget before lawmakers, marking the final budget ahead of the U.K. general election that will be held in May. The budget presentation is slated to begin at 12:30 p.m. London Time (http://www.parliament.uk/business/news/2015/march/budget-2015-statement/), or 8:30 a.m. Eastern Time.

Banking stocks will be in focus as investors wait to hear if the government plans to raise the rate of an annual bank levy that was aimed at raking in GBP2.5 billion ($3.68 billion). "With bank balance sheets continuing to shrink the rate of the levy will have to increase for the government to raise a similar amount to previous years. As a result there is unlikely to be many investors looking to buy bank stocks tomorrow," said Angus Campbell, senior analyst at FxPro, in a note.

Bank shares were mixed Tuesday. Barclays PLC lost 0.7% and Royal Bank of Scotland PLC shed 0.2%. HSBC PLC gained 1.5% and Lloyds Banking Group PLC picked up 0.1%.

Sainsbury and resources: Sainsbury's shares switched into the red, losing 0.8%. The shares had risen earlier in the session after the company's 1.7% decline in fourth-quarter same-store sales excluding fuel was less than an expected fall of 2%. Total sales excluding fuel fell 0.3% during the period. Sainsbury's said it is seen growth in like-for-like transactions following price reductions and simplified promotion.

Shares of rival supermarket chain Tesco PLC fell 1.7%, and Wm Morrison Supermarkets PLC dropped 2.2%.

Sainsbury's fourth-quarter trading statement represented a "slight beat against consensus" however of greater relevance is the longer-term dynamic showing like-for-like sales still trending down, said HSBC in a report Tuesday. Sainsbury is "vulnerable to a resurgent Tesco and faces food deflation [and] cost inflation," wrote analyst David McCarthy.

Meanwhile, shares of Antofagasta were solidly lower, losing 2.8% after the copper miner's yearly net profit fell to $459.8 million (http://www.marketwatch.com/story/antofagasta-net-profit-falls-30-2015-03-17) from $660 million a year ago, missing expectations of $676 million, according to a FactSet poll of analysts. The company did reaffirm plans to produce 710,000 tons of copper in 2015.

But shares of other mining and energy companies finished higher following recent declines for the sector. Precious metal producer Fresnillo PLC rose 1.6%, and diversified mining heavyweight BHP Billiton PLC (BHP) climbed 3.3%. BHP on Tuesday outlined plans to spin off a new company, South32 (http://www.marketwatch.com/story/bhp-outlines-plan-to-spin-off-south32-2015-03-16-18103017).

Tullow Oil PLC shares bounced up 6.1%, leading FTSE 100 advancers and outperforming a drop in Brent crude and U.S. oil prices (CLJ5).

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