London - UK shares fell on Thursday, extending steep falls seen in the previous session and following a drop on Wall Street, as investors awaited details of the European Central Bank's plan to buy asset-backed debt.
Engineering contractor Babcock International was a big loser, with traders citing reports that index compiler MSCI was capping weights in indexes due to foreign ownership limit.
The stock fell 2.7 percent even though Babcock had announced a 2.6 billion pound (R47 billion) contract win on Wednesday.
Trading volume in Babcock was solid, at almost 1-1/2 times its 90-day daily average, against the FTSE 100 on just 17 percent.
The UK benchmark was down 25.26 points, or 0.4 percent, at 6,532.26 points by 10:24 SA time.
It tracked losses on Wall Street, where stocks fell more than 1 percent on Wednesday after the first diagnosis of Ebola in a patient in the United States spooked investors.
Investors were reluctant to place any big bets at least before the ECB, later on Thursday, unveils details of its ABS purchase plan, aimed at propping up inflation and reviving growth in the euro zone - Britain's biggest trading partner.
The ECB plans to buy asset-backed securities - packages of reparcelled loans - with a view to spurring the market for such credit and supporting lending to the small and mid-sized firms that form the backbone of the euro zone economy.
“We are not really expecting any surprises. We will sit on the sidelines for now but be looking to pick up some bargains later on,” Mark Ward, head of trading at Sanlam Securities
The FTSE 100 index has endured a torrid week - down almost 2 percent so far - pressured by a slump in supermarket shares.
Sainsbury suffered fresh falls, down 0.8 percent, as Nomura cut its target price on the stock to 270 pence from 305 pence.
It had dropped 7 percent on Wednesday when it cut its annual sales forecast and put its dividend under review.
But peers Morrisons and Tesco recovered some of their poise, up 1.4 percent and 0.8 percent respectively.
Some traders were bullish on the sector.
“They offer value in the long term but you're going to have to take some pain in the middle,” said Joe Rundle, head of trading at ETX Capital.
While the recent weakness on the FTSE 100 has left it more “oversold” on its 14-day Relative Strength Index, a technical momentum indicator, than it has since February, analysts saw little scope for a short-term rebound.
Bill McNamara, technical analyst at Charles Stanley, highlighted that a 1 percent drop seen on Wednesday took the index through its August closing low and “more worryingly perhaps, through the uptrend that has been in place for the last eleven months”.
He said the chart is now pointing to a drop back to around 6,450 - around 1 percent from current levels - before buyers are tempted back in, “but the overall impression is that sentiment has shifted to a more negative bias”.
On a brighter note, tour operator TUI Travel firmed 0.6 percent after saying it would deliver full-year underlying operating profit growth of at least 9 percent, in line with its target, after selling at higher-than-average prices over the summer 2014 trading period. - Reuters