Heightened worries over global economic growth after more disappointing data from the United States and UK dragged Britain's leading shares lower on Thursday, with energy and banking stocks taking the biggest hit. The FTSE 100 index closed down 66.96 points or 1.2 percent at 5,742.03, extending its falls into a third straight session and reaching a new low point for the month at 5,726.50.
Weaker energy stocks were the main drag on the blue chip index, with crude oil down almost 1.5 percent as demand worries were exacerbated by the weak global data. "A gloomy day as US jobless disappoints and UK house prices fell again," said Mike Mason, trader at Sucden Financial Private Clients.
US weekly jobless claims fell last week but still missed forecasts, while the prior week number was revised upwards, raising fears that, after a period of improvement, the US jobs market could be showing signs of stalling. Meanwhile, British house prices suffered their sharpest monthly fall in more than two years, mortgage lender Nation-wide said, adding to concerns over the fragile nature of the UK economic recovery.
"Investors are also on edge ahead of tomorrow's ECOFIN meeting, where debt will once again headline the show. It is widely thought that Greece will need to further restructure its debt. The FTSE's approaching psychological support of 5,700 may, however, stem further selling for now," SucDen's Mason added. European finance ministers meet in Copenhagen on Friday and Saturday.
Ahead of that meeting, UK banks were big fallers, extending a recent reversal after a good run, with Barclays the top blue chip loser, down 4.7 percent. Part state-owned lender Lloyds Banking Group shed 2.9 percent. The Co-Operative Group raised doubts about its bid to buy 632 retail bank branches from Lloyds, as regulators put the proposed deal under scrutiny.
US blue chips were 0.6 percent lower by London's close, as the disappointing jobless data left investors wondering if the US economy can sustain the equity rally. Clothing retailer Marks & Spencer was also a big blue chip casualty, shedding 2.9 percent, while peer Next fell 1.0 percent after Sweden's Hennes & Mauritz - a stalwart of the British retail sector - posted a much smaller-than-expected rise in Q1 earnings. Among the minority of blue chip gainers, defensively perceived stocks stood out as investors' risk appetite faded, with some corporate news also providing support.
International Power jumped 5.6 percent as majority shareholder GDF Suez of France finally made an indicative 390 pence a share cash bid to mop-up the outstanding 30 percent of the British firm it does not already own. "We believe GDF Suez will have to raise their bid, but not by much," said Espirito Santo Investment Bank analyst Lawson Steele, who has a "fair value" estimate of 415 pence on International Power, which includes a 10 percent buyout premium.
Imperial Tobacco gained 1.5 percent as the world's fourth-biggest cigarette group said it saw strong sales and profit growth in the first three months of 2012 as conditions in Spain, Ukraine and the United States improved, with half-year sales up 3 percent. With just one trading session left before the month-end, the UK blue chip index is on course to post a fall of around 2.1 percent in March, after a choppy month in which it rallied to its highest levels since July 2011, before dropping back. A March decline would snap a three-month long winning streak and reduce first-quarter gains to about 3.2 percent, after a near 5.4 percent rise in the first two months of the year which had almost erased the 2011 decline of 6.7 percent.
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