Weak US data intensified anxiety about economic recovery and dragged Britain's top share index to a lower close on Thursday, with risk-sensitive banks and commodity stocks hit hardest. The FTSE 100 ended 42.23 points or 0.8 percent lower at 5,211.29. It closed down 0.3 percent on Wednesday, snapping a six-day winning streak.
Producer prices in the United States fell for a third month, the Philadelphia Federal Reserve Bank said factory activity in the US Mid-Atlantic region fell unexpectedly and New York manufacturing hit its lowest level since December 2009. Investors were unimpressed by quarterly results from J.P. Morgan Chase & Co, which topped estimates but with much of the gains coming in areas that will not be a stable future source of income. Banks which are closely geared to the overall health of the economy were among the heaviest fallers on the index with Barclays the standout loser, down 4.2 percent. "Economic data is being watched much more than good earnings numbers and it seems as if people were already anticipating good news," said Nick Serff, market analyst at City Index.
He said there was not much significant technical support above the psychological 5,000 level and that the lows just beneath 4,800 touched at the start of July would be watched.
Mining stocks, already pressured by data from China that showed a slowdown in economic growth in the second quarter, fell further as the US data implied anaemic demand from the world's largest economy. Eurasian Natural Resources was the worst off, shedding 3.5 percent, while Rio Tinto, hit too by a target price cut from Deutsche Bank in the wake of its production update on Wednesday, fell 3.3 percent.
Annual gross domestic product growth in China, the world's largest consumer of metals, moderated to 10.3 percent in the second quarter from 11.9 percent in the first, slightly below forecasts of 10.5 percent growth. The darkening outlook for demand pressured the price of crude back towards $75 per barrel contributing to a 0.9 percent fall for Royal Dutch Shell. BP bucked the trend, adding 0.2 percent. It said it planned to launch a critical pressure test on its ruptured Gulf of Mexico oil well on Thursday after a delay to fix a leaking hose.
GlaxoSmithKline rose 1.8 percent after US health advisers said on Wednesday its diabetes drug Avandia should be allowed to stay on the market but with additional warnings, easing a threat of further costly litigation. Peer Shire put on 0.3 percent as sector investors welcomed news from Swiss drugmaker Novartis, which raised its full-year sales goal. Among individual movers, Experian rose 2.5 percent after the credit information company issued a "positive" first-quarter trading statement, leading J.P. Morgan Cazenove to repeat its "overweight" stance on the stock. Intercontinental Hotels slipped 3.5 percent after Numis downgraded the stock to "reduce" from "hold", citing valuation grounds. Defensive stocks, which investors tend to rotate into when sentiment dips, were among the top gainers. Imperial Tobacco added 1.7 percent while water firm Severn Trent rose 1.9 percent, recovering after a dip on Wednesday on a cut in rating by UBS.