Britain's FTSE 100 index ended down on Tuesday as losses in banks and miners offset gains in drugmakers, oil producers and Vodafone. The UK benchmark closed 9.96 points lower, or 0.2 percent at 4,425.54, after losing 0.6 percent on Monday. The index is down 0.2 percent for the year but has rallied nearly 28 percent since hitting a six-year low on March 9.
Banks were the biggest drag on the index after Credit Suisse warned that margin pressures could hit Royal Bank of Scotland, Barclays and Lloyds Banking Group by up to 20 billion pounds. Barclays, RBS and Lloyds were off 5.6 percent to 10.3 percent, while HSBC and Standard Chartered shed 3.2 and 1.8 percent, respectively.
"My hope is that the market can consolidate around the 4,500 level. Our stand here is that it may drift back towards 4,241 as profit-taking comes in and it remains susceptible to more news from the financial sector," said Tim Whitehead, head of portfolio services at Redmayne-Bentley.
The European Union will stress-test its banking system by September to determine its resilience to the economic downturn and find out if it is adequately capitalised, EU sources and banking supervisors said. "I am rather cautious. I am looking to bring in one or two more defensive aspects to the portfolio when it's appropriate," Whitehead said.
Miners were other standout losers, with Rio Tinto, Lonmin, Xstrata, Vedanta Resources, Anglo American and BHP Billiton losing 1.5 percent to 8.6 percent. Anglo American and Rio Tinto said they were wary about when hard-hit commodity markets might recover, but were confident about the long-term health of the sector.
In the UK, the number of claiming jobless benefit rose by a smaller-than-expected 57,100 in April while average earnings in the three months to March fell by 0.4 percent. Adding to a further glimmer of hope, the National Institute of Economic and Social Research said Britain's economy stabilised in April after a year of falling output.
DRUGS, OILS EASE PAINS Drugmakers lent support to the blue chips, with AstraZeneca up 2.4 percent, enjoying a second-day boost from positive results with its experimental blood-thinner Brilinta, which has beaten market leader Plavix from Sanofi-Aventis and Bristol-Myers Squibb in a pivotal clincial study. UBS and J.P. Morgan both lifted price targets for the stock.
GlaxoSmithKline rose 3 percent after the company said it was to acquire a 16 percent shareholding in African generic drugmaker Aspen Pharmacare. Firmer crude prices lifted oil producers, with Royal Dutch Shell up 1.3 percent, BP rising 0.5 percent and Tullow Oil rising 1.1 percent. Vodafone added 3.2 percent. Goldman Sachs issued a positive note on the mobile phone giant ahead of next week's results.
Among other individual movers, Imperial Tobacco lost 4 percent after the cigarette group signalled in its first-half results that it was likely to moderate its dividend payout due to the cost of restructuring at its recent acquisition of Altadis. InterContinental Hotels advanced 2.5 percent.
The world's biggest hotelier met forecasts with a 44 percent drop in first-quarter profit, and said it was outperforming rivals and seeing some signs that demand was stabilising. Support services firm Serco gained 3.6 percent after it said it was on track to meet market expectations and as analysts pointed to strong visibility thanks to contracts worth 1 billion pounds signed so far this year.