Earnings concerns hit UK shares, uptrend intact

* FTSE 100 index finishes 0.5 percent lower

* Growth, earnings' concerns hit banks, miners

* Charts signal FTSE's uptrend intact

By Atul Prakash

LONDON, Oct 8 (Reuters) - British blue chip shares dipped onMonday with growth-linked banks and miners hit by concerns aboutearnings and the global outlook, although analysts said themarket's uptrend would resume soon.

UK banks

fell 1.2 percent, while mining stocks

were down 0.4 percent after the World Bank cut itsgrowth forecasts for China and as investors prepared forthird-quarter earnings, which kick off on Tuesday in the UnitedStates with results from aluminium company Alcoa


According to Thomson Reuters data, earnings for the U.S. S&P500

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

Cookson Group

, which makes products for the globalsteel industry, and recruiter Michael Page

on Mondaybecame the latest UK firms to issue profit warnings. Cooksonshares plunged 12.4 percent while Michael Page shed 0.6 percent.

Traders and analysts said the index had potential to bounceback again soon as the overall trend remained positive. Expecteddevelopments such as Spain seeking a bailout and some clarity onthe U.S. "fiscal cliff" of spending cuts and tax rises couldquickly lift investors' appetite for risk, they said.

"The market will trend upwards, but very slowly. A lot ofmoney is sitting on the sidelines, but you are not going tobreak out of the recent range until people see a solution to theEuropean problem and are confident with that solution," BobButler, head of trading at Westhouse Securities, said.

"At the moment, you would probably go for dividend plays.Investors are not keen to take too much risk, but are lookingfor the safety of their money. I would tend to be moredefensive."

The market saw choppy trade, with the FTSE 100

paring losses late in the session to end 29.28 points, or 0.5percent, lower at 5,841.74, after falling to a low of 5,818.76.

The index, which has traded in a broad range of 5,630-5,930in the past two months, is up nearly 5 percent this year and hasgained 11 percent since a low in June. But it has struggled tomake strong gains in recent sessions, mainly due to growthworries.

Fund managers said a good trading strategy in the currentenvironment was to look for individual companies with potentialto provide good returns, rather than taking a sectoralinvestment approach.

"You should look for the companies whose earnings are notcyclical and those which have a lot of bad news priced in," saidFelicity Smith, fund manager at Bedlam Asset Management, whichmanages about $700 million.

"We like companies such as Sanofi

and Novartis

, which have done very well this year. They have plentyof free cash flow, a very strong pipeline."

Swiss drugmaker Novartis rose 0.2 percent, while its Frenchpeer Sanofi fell 1.4 percent. Shares in the companies, however,are up 20 percent and 7 percent respectively this year.


Charts showed that the FTSE 100 index's medium-term outlookremained positive.

"I still like the index. The trend is up and the market isnot overbought either. Any moves to the downside are correctionswithin that trend," independent technical analyst Cliff Greensaid.

"Nearby support is going to be around the 5,740-5,750 area.If that gives way, it could trigger something deeper. But forthe moment, I expect that support to hold."

The support area represented a point on the uptrend linethat started in June and has been challenged several times oneach major correction, he said, adding the index would targetthe 6,100 level in the medium term.

Analysts said UK shares had become expensive followingrecent price moves, but were still relatively attractive.

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

"Stocks are not dirt cheap, but valuations are still okayand wouldn't be an issue when it comes to investing," MikeLenhoff, chief strategist at Brewin Dolphin, said.

The market was vulnerable to profit taking and could give upanother 100-150 points before recovering, he added.

(Editing by John Stonestreet and Susan Fenton)

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


For related prices, Reuters users may click on - *

UK stock reportFTSE 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.....................