Britain's FTSE 100 share index closed 0.9 percent lower Monday, with commodity stocks heading the losers after a Chinese rate cut failed to allay sector worries about the extent of the global slowdown. At the close the FTSE 100 index was down 37.77 points at 4,249.16, above the session low of 4,219.82, having reached a peak of 4,305.43.
The index closed down 1 percent on Friday. "It is not too surprising that today has seen the FTSE 100 remain contained within Friday's range as the focus of many switches to last-minute shopping (for the Christmas holiday), rather than buying shares," said David Jones, Chief Market Strategist at IG Index.
Weak miners took the most points off the index as China's central bank cut lending and deposit rates by 0.27 percentage points, the fifth cut since mid-September. Xstrata was the worst off, down 7.5 percent, while Eurasian Natural Resources, BHP Billiton,and Vedanta Resources were down 1.2-1.9 percent.
Rio Tinto fell 5.2 percent as it said it is in the process of shutting down all its iron ore mines in Australia's Pilbara region for two weeks to cut production by 10 percent in the face of declining demand from steel mills. Antofagasta, however, bucked the trend, adding 4.2 percent as investors reacted to positive news for power supplies to its Chilean mine.
Energy stocks fell as crude prices dropped back towards $40 a barrel, with BG Group down 1.6 percent, BP off 0.6 percent, and Tullow Oil losing 1.7 percent. Tullow was also impacted by a Credit Suisse downgrade. But fellow oil explorer Cairn Energy gained 4.3 percent after Cairn India said it had made an oil and gas discovery near its existing field in the western Indian state of Rajasthan.
Banks were mixed, with Standard Chartered up 1.5 percent, and HBOS gaining 1.4 percent, snapping a seven-session losing run. But HBOS's take-over partner, Lloyds TSB dropped 8.6 percent, and Barclays shed 1.2 percent. Barclays Chief Executive John Varley told BBC television that bank lending will take one to two years to return to normal, and asset prices need as much as 18 months to stabilise.
Insurers were also mixed. Friends Provident was the top FTSE 100 riser, up 5.6 percent, while Old Mutal continued to rally following recent sharp falls, up 5.2 percent. Prudential and Aviva, however, lost 1.5 and 3.5 percent respectively.
Retailers fell back, following a recent strong run, amid mixed signals in the last few days before Christmas as analysts highlighted the downside of cutting prices to boost top lines. John Lewis, the employee-owned group, said sales picked up during the last weekend before Christmas, the sector's most important time of year, but were still down on a year ago.
Argos-owner Home Retail, which made its return to the blue chip board on Monday after the last FTSE resuffle, was the top faller, down 13 percent, while Marks & Spencer lost 2.2 percent, Next shed 1.1 percent and Kingfisher shed 5.1 percent. US blue chips were 0.8 percent lower in early trade Tuesday as corporate earnings disappointments weighed.
"The UK GDP figure will be under scrutiny tomorrow as traders hope, in much the same way as Bob Cratchit did, for a morsel of good news before Christmas Eve. But the overall outlook remains rather downbeat and many will certainly be glad of the break," said James Hughes, Market Analyst at CMC Markets.