Britain's top share index ended a five-session winning streak on Tuesday, toppled by weakness in market heavyweight HSBC on worries over its US consumer finance unit and US data that sparked inflation and interest rate concerns. Cigarette and pub companies, such as Gallaher and Enterprise Inns, also weighed on the index in the wake of government proposals to ban smoking in most British pubs.
The FTSE-100 benchmark index closed down 32.7 points, or 0.7 percent, at 4,770.4, giving back part of a nearly 4 percent gain since the beginning of November, which swept the index to a 29-month peak on Monday. The index spent most of the session in negative territory but its drop was hastened by the afternoon's release of US inflation data, which dealers took as a signal that US interest rates will go up in December.
They added that rising input costs, at a time when pricing power is not taking up the slack, also triggered fears that margins would get squeezed.
"The data release was disappointing but we were already coming back a bit, simply by virtue of the fact that we'd had such a long run in the past few weeks, so people are stepping back and thinking maybe things got a little bit ahead of themselves," said Paul Niven, head of strategy at F&C Asset Management.
"We think the market can push a bit further on. Valuations look reasonably good and the fundamentals are reasonably supportive."
HSBC put the biggest dent in the blue-chip index, falling 2.8 percent after a slide in third-quarter earnings at its key US operations due to higher costs.
Steel firm Corus fell 4.9 percent, as investors locked in profits triggered by its inclusion in the prestigious benchmark index and by rising profits at rival steel giant Arcelor, while outsourcing firm Capita fell on a downgrade from Smith Barney, dealers said.
Tobacco company Gallaher fell 2.3 percent and British American Tobacco dropped 0.9 percent, while pubs firm Enterprise Inns dropped 3.5 percent as the British government unveiled plans to ban smoking in work places, restaurants and pubs serving food.
Among mid-caps, shares in pubs firms JD Wetherspoon and Mitchells & Butlers shed about 3 percent each.
Vodafone was another drag on the index, reversing an earlier rise sparked by plans to hand back 6 billion pounds to its shareholders by doubling its dividend.
High payout expectations had already been priced into the stock, dealers said, and after an initial run higher the shares fell back to close 0.5 percent lower at 142 pence.
One fund manager, who declined to be named, said the company should now be viewed as a utility rather than as a growth stock.
"Vodafone is more of a utility and one can view the rise of the dividend and the buybacks in that light," the fund manager said.
Shares in media firm Emap headed in the opposite direction, gaining 1.7 percent after first-half profit came in at the top of end analyst expectations, as conditions at its struggling French TV listings magazine stabilised.
Retail stocks enjoyed mixed fortunes, with Burberry shares rising 4.6 percent after strong [first-half profits and a share buy-back] and MFI Furniture gaining 4.2 percent after it said it was getting back on track following problems with its supply chain system.
But high-street clothing chain French Connection slumped 16 percent after a profit warning.