Britain's leading share index shed 0.5 percent on Wednesday as weakness in commodity and banking issues countered gains in selected defensive stocks, reflecting fading risk appetite among some investors. At the close, the FTSE 100 was 25.23 points lower at 5,473.48, having lost 0.7 percent on Tuesday following China's decision to tighten banks' reserve requirements.
"The market is still a little bit all over the place, spooked slightly by the Greek prime minister's comments ... that the country can go its own way without the IMF, and by a drop back by crude after a jump in inventory data", said Nick Serf, market analyst at City Index.
Greek Prime Minister George Papandreou said Greece will not quit the eurozone or seek help from the IMF - indicating the country would attempt to manage its own fiscal problems but suggesting there may still be uncertainty on whether it can weather the storm. "But investors are still happy to buy on the dips and this keeps the market bouncing around," Serf added.
Energy issues were depressed for a second successive session, weighed down by sharp falls in the crude price, off 1.9 percent to below $79 a barrel after a US oil inventory report showed stockpiles rose last week. Royal Dutch Shell was the worst off, down 1.8 percent as a number of analysts reduced their forecasts for the oil major's fourth-quarter earnings.
Morgan Stanley downgraded its rating for the Anglo-Dutch firm. Peers BP, BG Group and Tullow Oil shed 0.3 to 1.1 percent. Miners saw an earlier rally reversed with metal prices weaker again after China's monetary tightening move on Tuesday, coupled with recent disappointing fourth-quarter earnings numbers from US aluminium producer Alcoa.
Gold miner Randgold Resources was the biggest FTSE 100 faller, down 2.8 percent, while Lonmin, Fresnillo, Xstrata, Vedana Resources, and Rio Tinto were off 0.5 to 2.0 percent. Banks came under pressure after a profit warning from France's Societe Generale and as investors continued to mull the impact of a potential US government levy on banks. HSBC, Barclays and Standard Chartered lost 0.3 percent to 1.5 percent.
But part-nationalised lenders Lloyds Banking Group and Royal Bank of Scotland managed to rally, adding 0.1 and 2.4 percent respectively. US blue chips were up 0.3 percent by London's close as investors awaited the forthcoming deluge of fourth-quarter earnings reports. Drug majors went in opposite directions. AstraZeneca gained 1.1 percent as Credit Suisse hiked its rating to "neutral" from "underperform" on valuation grounds.
But GlaxoSmithKline fell 1.2 percent as Credit Suisse cut its rating to "underperform" on concerns potential benefits from the pandemic flu outbreak have been overstated. Other defensively perceived stocks featured on the blue chip gainers board as investors' risk appetite waned, with telecoms firm BT Group, gas utility Centrica and drinks can maker Rexam up 0.8 to 2.1 percent.
Confectionery firm Cadbury added 1.6 percent as hostile bidder Kraft raised its 2009 profit forecast and its management courted the firm's shareholders in London. A report on Theflyonthewall.com cited the Associated Press as reporting Hershey was preparing a solo bid for Cadbury. Broker comment also created some individual blue chip risers.
Schroders was the top FTSE 100 gainer, up 2.7 percent after HSBC upgraded the fund manager to "overweight" as a new analyst assumed coverage on the sector. Search software firm Autonomy took on 1.7 percent, buoyed by an Nomura upgrade to "buy"".
And motor insurer Admiral Group gained 2.2 percent as BofA Merrill Lynch hiked its target price to 1,200 pence. British industrial output rose slightly faster than expected in November, with a jump in oil and gas extraction outweighing a weaker-than-expected manufacturing performance.