Britain's leading share index ended down on Wednesday, but trimmed earlier losses as inflation data lifted housebuilders and property stocks, and US stocks gains distracted investors from credit market concerns. The FTSE 100 closed down 34.2 points, or 0.56 percent at 6,109.3, but well off its day's low of 6,041.7. Major European markets also finished lower.
The UK benchmark index is down 1.8 percent for the year as fears that the US subprime turmoil could spread to the wider economy have roiled global markets since June.
"UK follows the US ... Today Wall Street opened higher, taking some pressure off the European markets," said Howard Wheeldon, senior strategist at BGC Partners. "We are going to bobble around as long there is so much uncertainty around. We are not talking in terms of days but in terms of weeks ... I still don't think it's time to play heavily into equities. There is still more bad news to come from subprime." Housebuilders and property firms, which have been battered by concerns of higher rates and credit market turmoil, rose as UK interest rates were seen peaking, traders said, after data showed UK inflation fell below the Bank of England's 2 percent target in July.
Persimmon advanced 3.7 percent to top the FTSE 100 gainers, while Barratt Developments put on 2.8 percent and Bovis Homes added 4.1 percent. Among property companies, Land Securities tacked on 1.3 percent and Hammerson rose more than 2 percent. The weakest UK wages growth in four years and details of a unanimous Bank of England vote for steady interest rates in August reinforced an emerging view that borrowing costs have peaked at 5.75 percent.
Apart from the subprime and credit market concerns, banks were also hit by trading ex-dividend, including HSBC, Royal Bank of Scotland, Standard Chartered and Barclays. The shares were down between 0.6 and 2.3 percent.
Other losers included Schroders, Prudential and Liberty International, which also traded without a dividend this session. Northern Rock fell 5.3 percent on concerns over its funding as the credit market deteriorates and speculation of a new profit warning.
The bank, which is the worst performer in the FTSE 100 this year, said it had continued to raise funding and saw wholesale market conditions easing, but declined to comment on the profit warning rumours.
Northern Rock, which raises most of the funds for its mortgage lending on wholesale credit markets, said in June profit growth would slow this year as it feels the impact on its borrowing costs of five UK rate rises in less than a year.
Miners also languished after benefiting from higher base metal prices and an upgrade in the sector in the previous session. BHP Billiton, Rio Tinto, Anglo American, Lonmin and Xstrata slipped 0.8 to 1.9 percent.
Among other individual movers, ITV, Britain's biggest commercial broadcaster, rose 2 percent after it said its share of all-adult viewers rose 23 percent year-on-year in July and had maintained a strong performance in August.
Brewer Scottish & Newcastle continued the previous day's rally, which was driven by news that Carlsberg was buying S&N shares in the market as a prelude to a bid for the Edinburgh-based company. The stock was up 2.2 percent.
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