Britain's blue chip gauge snapped a four-session rally on Friday, weighed down by weak Chinese macro-economic data, disappointing earnings from key US companies and uncertainty over the outcome of Greece's debt negotiations. Minining stocks shed 0.9 percent, having risen nearly 10 percent over the previous eight sessions, as data showed manufacturing activity in China, the world's largest consumer of metals, got off to a slow start this year.
Other sectors sensitive to economic activity, such as industrial engineering and oil & gas, also fell, with Weir and Petrofac among the biggest casualties on concerns regarding their earnings prospects. Also contributing to the cautious tone were disappointing results from bellwether US companies Google and Geneneral Electric, while market speculation that an agreement between Greece and its creditors would be announced by the European market close proved over-optimistic.
"We've got news in Greece over the weekend so I'd be recommending that people take profits," Trevor Coote, head of equity sales at Alexander Securities, said. "If we get another piece of bad news, we get a pull-down." The FTSE 100 ended the session 0.2 percent lower at 5,728.55 points, but recorded a 1.6 gain for the week, which saw trading volume pick up momentum, especially among financials, after a sluggish start to January.
Banks clocked up a ninth consecutive session of gains, reaching levels last seen in October, as investors turned more positive on the sector after a move by the European Central Bank to inject liquidity into the market last month. "It comes down to the ECB action," said a trader in London, commenting on the rise in banking shares and trading volume. "People's risk appetite is slowly creeping back into the market." Volatility in the FTSE fell in tandem with the index, in an uncharacteristic move that suggested investors were becoming less nervous about the market's prospects. The FTSE volatility index, which is based on sell- and buy-options on the British benchmark and traditionally has an inverse correlation with the gauge, fell for a third straight session to close 2.8 percent lower.
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