GO
Loading...

UK shares falls on earnings, growth concerns

Monday, 8 Oct 2012 | 8:00 AM ET

* FTSE 100 index falls 0.7 percent

* Concerns about growth, Q3 earnings hit sentiment

* Growth-linked sectors suffer; banks, miners slide

* Technical factors suggest room for a bounceback

By Atul Prakash

LONDON, Oct 8 (Reuters) - Britain's top share index fell on Monday as concerns about the looming third quarter earnings season and the global economic outlook hurt growth-linked sectors like banking and mining.

Analysts said the FTSE 100

, down 0.7 percent at 5,828.88 by 1119 GMT. could fall 2-3 percent more in the near term, with sentiment dented by a cut in the World Bank's growth forecasts for the East Asia and Pacific region.

But a likely aid request from Spain and hoped-for clarity on U.S. spending cuts and tax rises could improve the mood, and technical factors suggested the market could thereafter bounce back.

The World Bank also said there was a risk the slowdown in the world's biggest metals consumer China could worsen, triggering a sharp sell-off in UK mining stocks

.

The mining index fell 1.4 percent.

"The World Bank's downgrade is another indication of the various concerns ... which are likely to be reflected in the earnings results," Mike Lenhoff, chief strategist at Brewin Dolphin, said.

The market was vulnerable to profit taking and could give up another 100-150 points before recovering, he said.

Analysts said earnings estimates had been cut over recent weeks, led by energy and materials firms and economically sensitive sectors such as financials.

The UK banking index was down 1.4 percent, pressured by Standard Chartered , Barclays and Royal Bank of Scotland , down 1.9 to 2.3 percent ahead of the results season that starts with U.S. aluminium firm Alcoa

on Tuesday.

According to Thomson Reuters data, earnings for the U.S. S&P 500

companies are forecast to have fallen 2.4 percent from a year earlier, the first drop in three years. The earnings season in Europe will pick up in the second half of October.

Cookson Group

, which makes products for the global steel industry, and recruiter Michael Page

on Monday became the latest UK firms to issue profit warnings. Cookson fell 13.7 percent while Michael Page shed 1.3 percent.

BAE Systems

fell 1 percent after its largest shareholder issued a long list of objections to the group's proposed $45 billion merger with EADS

. 'UPTREND INTACT'

Charts showed that the FTSE 100 index's medium-term outlook remained good. The index is up 4.6 percent so far this year and has advanced more than 11 percent since hitting a low in June.

"I remain relatively positive as the four-and-a-half-month uptrend is still intact," Dominic Hawker, technical analyst at Westhouse Securities, said.

He said that it was encouraging that the index still traded above its uptrend line, now at around 5,750 and which could prove to offer strong support. The index faced a tough resistance at around 6,000 points, its 2012 high.

Analysts said UK equities had become expensive following recent price moves, but were still relatively attractive.

According to Thomson Reuters Datastream, the FTSE 100 index traded at 10.7 times its one-year forward earnings, up from 6.6 times in October 2008 but below its 10-year average of 11.5.

"Stocks are not dirt cheap, but valuations are still OK and wouldn't be an issue when it comes to investing," Lenhoff said.

(Editing by John Stonestreet)

((atul.prakash@reuters.com)(+44 20 7542 6189)(Reuters Messaging:)(atul.prakash.thomsonreuters.com@reuters.net))

((

For related prices, Reuters users may click on - *

UK stock report FTSE index: techMARK 100 index: FTSE futures: Gilt futures: Smallcap index: FTSE 250 index: FTSE 350 index: Market digest: Top 10 by vol: Top price gainers: Top % gainers: Top price losers: Top % losers:

* For related news, click on - *

UK hot stocks: Wall Street: Gilts report: Euro bond report

Pan European stock report:

Tokyo stocks: HK stocks: Sterling report: Dollar report:

* For company prices, click on - *

Company directory: By sector:

* For pan-European market data, click on - *

European Equities speed guide................

FTSE Eurotop 300 index...........................

DJ STOXX index...................................

Top 10 STOXX sectors........................

Top 10 EUROSTOXX sectors...................

Top 10 Eurotop 300 sectors..................

Top 25 European pct gainers....................

Top 25 European pct losers.....................

))

Keywords: MARKETS BRITAIN STOCKS/