UK stocks ended sharply lower on Wednesday, weighed down by weak oils and banking stocks, as well as a wobble for the property sector on concerns an expected boost in the UK government's pre-budget speech might not materialise.
Hammerson lost 2.9 percent and British Land dropped 2.3 percent amid uncertainty about whether or not US-style tax efficient real estate investment trusts (REITs) would be introduced in the pre-budget report next week and what form they might take.
British Land was singled out by UBS, which downgraded the stock to neutral after a recent strong run and on uncertainties surrounding REITs, while fellow investment bank Merrill Lynch was also cautious.
"For the companies, a key differentiating feature will be how the conversion tax will impact," Merrill said in a note. "British Land is at risk of suffering the highest conversion tax."
Nearly nine out of every 10 blue chips ended lower, pulling the FTSE 100 index down 67.8 points, or 1.2 percent, to 5,423.2 by the close of play - its biggest one-day drop in terms of points for six weeks.
Oils and banks accounted for about half of the drop. Brewer SABMiller and National Grid added further pressure as their shares traded without the right to the latest dividend and miner Anglo American lost 2.9 percent as gold prices fell from an 18-year peak.
Analysts said concerns that strong US economic data would trigger more US interest rate hikes than forecast were also hitting sentiment, while comments from Bank of England policymaker David Walton, adding to the view the bank is in no hurry to lower rates, further dampened the mood.
On the month, however, the FTSE sealed a gain of 2 percent and some market watchers remained upbeat.
"We're still sticking with our target of 5,600 for the end of the year so we do see the market resuming its upward path," said Robert Parkes of HSBC. "The corporate newsflow is still very good. Profitability is very high and valuations are still low so we think all the ingredients are still in place for the market to trend higher."
Daily Mail and Evening Standard owner Daily Mail & General Trust led the handful of stocks to end higher with an 11 percent leap after investors welcomed consensus-beating annual results and the prospect of cash being returned to shareholders if the group sold its regional newspaper division - an option it said it was looking into.
Europe's biggest home improvements retailer Kingfisher was next in line with a 2.2 percent rise as dealers said its latest figures were not as bad as expected, despite a 53 percent fall in profits at its core B&Q chain in the third quarter.
Software maker Sage also pleased as it reported profits up in line with forecasts and was keen on prospects for 2006. The shares added 1 percent.
"Operating performance for 2005 was solid, which should ease fears that the company is facing margin pressure, particularly in the UK. In addition, the outlook for 2006 is encouraging," analysts at Dresdner Kleinwort Wasserstein wrote in a research note.
In the media sector, BSkyB edged higher after executives from the broadcaster met UBS analysts and repeated their goal
"The meetings gave us reassurance in our view that the company's longer-term plans remain very much on track," the bank said as it repeated a "buy" rating on the stock.
Transport firm Go-Ahead stood out among mid-cap movers with a 8.4 percent rise on news its joint venture with France's Keolis had won an eight-year deal to run an integrated regional rail franchise.