UK shares fall in cautious trade

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Britain's top shares fell on Thursday as investors reined in their appetite for risk ahead of meetings that could pave the way for more central bank stimulus measures, with the mining sector and publisher WPP among the top fallers.

By 12:27 SA time, the FTSE 100 was down 14.15 points, or 0.3 percent.

Many investors are on vacation and, with the index having rallied as much as 11.5 percent since mid-June on expectations of central bank action, trading volumes were very low at just 15 percent of the 90-day daily average.

Reflecting investor caution, most of risers on the index were defensive shares, with water utility Pennon and British American Tobacco up 0.8 and 1.0 percent respectively.

Friday's global gathering of central bankers in Jackson Hole, Wyoming, will be closely watched, as will the ECB's policy meeting on Sept. 6 and a German Constitutional Court ruling on the euro zone's permanent bailout fund on September 12, which may offer direction on the ECB's bond-buying plans.

“Once we get the meetings out the way then we might return to the fundamentals, which are overwhelmingly poor enough for the markets to correct a little bit,” David Man, a partner at RMG Wealth Management, said.

Man said central bank assets purchases had been priced into the market and he expected to see more detail, rather than action, on what central banks might do to stimulate global growth, which left a lot of room for disappointment.

“There is an element of the law of diminishing returns and you can not keep jaw-burning the markets higher and expect them to behave, which is why we are neutrally positioned to see which way it rolls,” he said.

Mining stocks slid across the board amid fresh worries over the prospects for Chinese economic growth and a further drop in the price of steelmaking ingredient iron ore, languishing at near 3-year lows.

China is prepared to buy more EU government bonds amid a worsening European debt crisis that is dragging on the world economy, Premier Wen Jiabao said on Thursday.

Ukraine-focused iron ore producer Ferrexpo topped the list of fallers, losing more than 10 percent in early trade to hit its lowest level since November 2009.

Copper producers Kazakhmys and Antofagasta also dipped, and sector as a whole was down 1.8 percent.

EARNINGS WOES

WPP fell 3 percent after it nudged down its full-year outlook as cautious customers demanded better value for money from the world's largest advertising group in the second quarter of the year.

Concerns over its earnings outlook saw motor insurer Admiral shed 2.4 percent. Shore Capital cut its earnings expectation for the firm.

Reflecting the weak economic fundamentals faced by businesses, the second-quarter earnings season has been tough for UK-listed companies.

Some 52 percent that have reported earnings have missed already watered down expectations, with average earnings contracting year-on-year by around 27 percent.

There was better news for Wm Morrison Supermarkets which topped the FTSE 100 leaderboard, up 1.6 percent and rallying after a recent decline with traders citing a readacross from French peer Carrefour's results.

Europe's largest home improvements retailer Kingfisher bounced too, up 1.0 percent as Citigroup raised its rating on the firm to “buy” from “neutral” as it sees the company benefiting form its strong market position, balance sheet and management team, despite cutting its earnings forecasts. - Reuters


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