Britain's top share index ended down 0.9 percent on Tuesday, retreating for the third straight session, as heavyweight Vodafone and insurers fell, but Thomson Reuters gained after quarterly results. The FTSE 100 closed 34.29 points lower at 3,816.44, after losing 1 percent on Monday. The UK benchmark closed below the 4,000 mark on Friday for the first time in three months, and is down nearly 14 percent so far this year.
Vodafone, the world's biggest mobile phone group by sales, lost 2.8 percent after it said it would cut about 500 jobs in Britain, or 5 percent of its UK workforce. "There is no one single catalyst for the weakness, but with Vodafone cutting 5 percent of its workforce to reduce costs, another monthly drop in UK retail sales, and US consumer confidence hitting a record low, investors are being given little reason to shift into buying-mode," said David Jones, chief market strategist at IG Index.
Oil shares languished, with Royal Dutch Shell, Cairn Energy and BG Group down 1.1 to 1.4 percent. Miners were also lower. Rio Tinto, Vedanta Resources, Xstrata and Eurasian Natural Resources slipped between 2 and 4.9 percent. Banks remained under pressure as Barclays, Lloyds Banking Group, HSBC and Standard Chartered lost between 0.5 and 5.1 percent.
Royal Bank of Scotland, however, climbed 4.3 percent ahead of results, due on Thursday, on hopes the group could create a ring-fenced division for its unwanted assets. Keith Bowman, an analyst at Hargreaves Lansdown, said the market was trying to digest comments from Federal Reserve Chairman Ben Bernanke, along with more bad news on US house prices and the continuing fear of nationalisation of their banks.
The United States on Monday vowed to prop up ailing banks if needed, even as a Federal Reserve official urged that such interventions should be short term. US President Barack Obama will deliver his first address to Congress at 9 pm EST (0200 GMT on Wednesday), while Bernanke warned that unless government efforts succeeded in restoring financial stability, the nation's recession might not end this year.
US consumer confidence plunged to another record low in February, while the S&P/Case-Shiller home price index showed prices of US single-family homes dropped 18.5 percent in December from a year earlier as the monthly pace accelerated. In the UK, the British economy would need more help from the Bank of England (BoE), with the purchase of assets using newly created money looking more and more likely as interest rates neared zero, BoE policymaker Andrew Sentance said.
Life insurers also saw big falls, with capital-raising concerns continuing to weigh on the sector as equity market valuations drop back again. Legal & General, which recently denied it planned to launch a rights issue, was among the top FTSE 100 fallers, down 3.8 percent. Friends Provident sank 9.8 percent, Prudential dropped 7.6 percent, and Aviva sagged 5.1 percent.
Outsourcing company Serco Group advanced 3.8 percent after Banc of America-Merrill Lynch upgraded its rating to "buy" from "neutral" on valuation grounds ahead of upcoming results. Thomson Reuters shares in London rose 6.6 percent to top the FTSE 100 gainers' list. The news and financial data publisher reported a stronger-than-expected quarterly profit and said it expected revenue to grow in 2009 despite job cuts and decreased spending among financial industry customers.