Monday, October 8, 2012

UK shares falls on earnings, growth concerns

* 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

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


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.


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)


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