Britain's benchmark share index dipped to a one-week low on Monday and charts pointed to further weakness, with investors spooked by global growth concerns and fading expectations of any near-term radical measures to resolve the euro zone crisis.
European leaders have agreed on a 130 billion euros ($156 billion) package to revive growth, but the chances of other plans being unveiled at a June 28-29 summit have been slashed by German Chancellor Angela Merkel, who resisted pressure for common euro zone bonds or a more flexible use of Europe's rescue funds.
That delivered a further blow to investors' risk appetite, already bruised by the early indications that June was a gloomy month for the global economy, as signalled by surveys from across the globe last week.
“The risks in the near term are skewed to the downside, the top-down outlook is still very difficult,” said Ian Williams, strategist at Peel Hunt, estimating that the FTSE could fall to around 5,300-5,350 points before buyers are lured back in.
The FTSE 100 index of UK blue chips was down 33.96 points, or 0.6 percent, at 5,479.93 points at 12:59 SA time, holding below both the 50- and the 200-day moving averages which it broke through at late last week in a negative technical signal.
Simon Smollett, technical strategist at Credit Agricole CIB, said the short and medium-term trend for the FTSE points lower, with support at 5,450.
Heavyweight oils and miners shaved around 10 points off the index, as crude and metal prices retreated on expectations that slower global growth could crimp demand.
“From a UK perspective, the obviously risky ones are the global (sectors),” Williams at Peel Hunt said.
“If there is disappointment, it will be the resources that suffer the most. The overall balance has weakened again over the last couple of months: relatively speaking it's the domestic sectors that are delivering fewer downside surprises than the global ones, sectors like retail and travel and leisure.”
Gainers on the FTSE on Monday included owner home improvement chains owner Kingfisher, and traditionally defensive utilities such as National Grid and Severn Trent.
The biggest blue chip faller was Shire, down 13 percent to 17.12 pounds, with volumes half way through a session already one-and-a-half times those traded on an average day.
US regulators unexpectedly ruled against the British firm in a battle over generic copies of its hyperactivity drug Adderall XR, approving a cut-price version of the medicine from rival Actavis.
“We estimate this drug is highly profitable and increased competition leads us to revise our 2013E revenue and EBIT (earnings before interest and tax) estimates downward by 5 and 14 percent, respectively,” Barclays analysts said in a note, cutting their price target to 20.30 pounds from 21.20.
“This development is likely to sharpen investors' focus on other generic threats and hence impact to sentiment is likely to exceed impact to fundamentals.” - Reuters