Britain's blue chip index ended 0.2 percent lower on Friday, as banking and insurance stocks fell on a gloomy economic outlook, outweighing gains in commodities and retail sector shares. The commodity-heavy FTSE 100 closed down 9.7 points at 5,352.6, after losing 1.6 percent on Thursday. The benchmark index ended the week with a decline of 0.4 percent - the ninth negative weekly close in the past 10 weeks.
Banking stocks were the biggest sectoral loser, as investors remained concerned about more writedowns and the grim economic outlook. "The FTSE will struggle to make progress in the short term. The first sector that needs to recover is the banking side, but the economic news generally is deteriorating," said Roger Cursley, UK strategist at Investec. "Banks would continue to struggle. There remains question marks that the banking sector as a whole in the UK has raised enough additional capital."
Figures showed on Friday that Britain's economy grew at its weakest pace in three years in the second quarter of this year, while data in the previous session showed the pace of existing US home sales tumbled to a 10-year low, reminding investors of the problems plaguing the world's largest economy.
But sales of newly constructed US single-family homes were stronger than expected in June. New orders for long-lasting US manufactured goods also rose unexpectedly in June. Royal Bank of Scotland, HSBC, Lloyds TSB and Standard Chartered fell between 1.2 and 2.7 percent.
Shares in insurance companies fell sharply after German reinsurer Munich Re, the world's second-biggest, issued a profit warning, saying turmoil in global markets would hurt its second-quarter earnings. Hannover Re, the world's fourth-biggest reinsurer, also said that it would be difficult for the company to reach full-year targets if capital markets did not calm down.
Among UK insurance companies, Aviva fell 4.2 percent, Old Mutual declined 2.1 percent, Prudential shed 3.7 percent and Legal & General dropped 6.7 percent. "The FTSE has seen three days of losses against two (days) of gains as it continues to hover just ahead of the 5,300 level, which increasingly appears to be the area at which buyers re-enter the market," said Anthony Grech, analyst at IG Index.
But retailers bucked the trend, gaining after facing pressure in previous weeks. Britain's third-biggest supermarket group J Sainsbury added 3 percent and Wm Morrison rose 1.4 percent. Retailer Next gained 1.8 percent, while the world's third-largest food retailer Tesco was up 0.2 percent. Miners were mixed, with BHP Billiton up 0.8 percent, Ferrexpo rising 4 percent and Xstrata gaining 1.7 percent.
But Anglo American, Vedanta Resources, Lonmin, Antofagasta and Eurasian Natural Resources fell between 0.4 and 7.3 percent. Shares in oil and gas companies rose, despite a 1.5 percent decline in oil prices. Gas producer BG Group advanced 3.8 percent to be among the top FTSE 100 gainers after Credit Suisse lifted its price target to 1,600 pence from 1,560 pence.
BP, Royal Dutch Shell, Cairn Energy and Tullow Oil added between 0.3 and 1.5 percent. Nuclear operator British Energy was down 0.3 percent. A source briefed on the matter said the company had agreed to be taken over by French utility EDF for around 12.4 billion pounds ($24.61 billion).