Britain's top shares fell on Friday as US growth data missed expectations and came with a warning of speed bumps ahead for the world's biggest economy, heaping pressure on mining and integrated oil stocks. London's blue chip index was down 61.75 points, or 1.1 percent, at 5,733.45.
US fourth-quarter gross domestic product came in a touch below economists' expectations for a 3 percent annual rise, as it expanded at 2.8 percent. "Despite some disappointment that it was below consensus, 2.8 percent is still a good number," said David Miller, Partner at Cheviot Asset Management, which has assets of 3.5 billion pounds.
Traders said the fact the US was still growing when Europe was sliding towards recession, and that the Federal Reserve had promised to support growth on Thursday, prevented sharper losses for UK equities, which had risen 1.3 percent on Thursday. The FTSE 100 also remained within its recent trading range between 5,700 and 5,800.
However, the US Commerce Department said a slower pace of spending on capital goods hinted at softer growth early this year. The prospect of demand weakening in the world's biggest economy, as companies choose to save cash rather spend money on future projects, dented miners, which rely on demand from manufacturers and constructors using base metals.
Miners lost 1.7 percent after a 4 percent surge the previous session, which was fuelled by solid production reports and hopes of stronger demand from the United States. Building supplies merchant Wolseley, which has large exposure to the United States, fell 2.4 percent.
With the outlook for global growth at risk, weak earnings from US peer Chevron Corp muddied sentiment among integrated oils stocks. The sector had avoided the riskier asset bloodbath in 2011 as investors focused on its growth characteristics, strong balance sheets and dividend attractions, and it is in part suffering now as investors rotate out of previous winners.
BG shed 2.7 percent, while heavyweight BP was down 2.6 percent after it lost an attempt to shift over $15 billion of costs related to the Gulf of Mexico oil spill onto contractor Transocean. Friday's retreat on the FTSE 100 in weak volumes - just 87 percent of its 90-day average - left question marks over the sustainability of the index's recent rally, which has seen the UK's benchmark index rise 2.9 percent 2012. "We're still cautious on the outlook for equities at present," said Sally Davies, fund manager at Octopus Investments, as investors also viewed with caution Greek debt talks which will continue over the weekend.
"Although sentiment is currently upbeat, bond markets and commodity markets have so far conspicuously failed to join in, which suggests the current rally, driven on relatively low trading volumes, is a fragile one," Davies said. That caution has seen defensive stocks outperform over the last twelve months, and Imperial Tobacco was up 1.5 percent as Citigroup argued the stock's underperformance at the start of 2012 had been overdone.
Citi said in the past 10 years, Imperial has risen every single December, with an average climb of 7 percent. However, it usually falls in January, with an average decline of 3 percent, as investors start the year with a pro-cyclical tilt. "This year the trend has been particularly marked, but we think it represents a good opportunity to buy," it said.
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