Britain's leading share index edged lower on Wednesday as investors refocused on fundamentals, specifically weaker-than-expected eurozone data, with the Greek debt restructuring theatricals out of the way for now. Recession concerns increased after data showed the euro zone's service sector unexpectedly shrank in February, with Europe being Britain's main market for its goods.
"The FTSE ends the trading day fairly flat off the back of lacklustre trading and average volume, as a fall in Banking and Mining Stocks offset the gains by Oil and defensive stocks," said Mike Mason, trader at Sucden Financial Private Clients. Banks were the biggest blue chip fallers, extending Tuesday's weakness seen after the second euro zone bailout for Greece failed to alleviate concerns about the debt-laden country, with the cautious mood not helped by a downgrade of Greece's credit rating by Fitch on Wednesday. Worries remain about the implementation of key austerity measures in Greece which were crucial in getting the bailout.
Royal Bank of Scotland was a big sector faller, down 3.1 percent as investors took a cautious stance ahead of the lender's full-year results due on Thursday. Barclays also fell, down 3.5 percent, albeit as the stock traded ex-dividend. Carnival and Reckitt Benckiser also traded without their payment attractions, knocking 3.5 points overall off the FTSE 100 on Wednesday.
The FTSE 100 index ended down 11.65 points, or 0.2 percent at 5,916.55, retreating further from a seven-month closing peak reached on Monday, stuck in a tight trading range established earlier in February between around 5,850 and 5,920. Volume was 95 percent of the 90-day daily average.
Miners fell back in tandem with copper prices as demand confidence was rattled by weak export data from top consumer China, as well as doubt over Greece's ability to implement tough reforms aimed at cutting its debt. Vedanta Resources was the top blue chip faller, down 5 percent as RBC Capital cut its rating for the mining group to "sector perform" from "outperform", in part on valuation grounds, and reduced its earnings forecasts and target price.
Vedanta had added 7 percent on Tuesday on reports of a potential consolidation of both its Sterlite and Sesa Goa minorities. Gains in integrated oils, however, provided underlying strength for the blue chips, led by BG Group up 1.9 percent, thanks to a steady crude price and with consolidation moves in the sector. Royal Dutch Shell, up 0.2 percent, launched an agreed 992.4 million pounds offer for Mozambique-focused small cap oil explorer Cove Energy, which jumped 25 percent.
Europe's largest drinks can maker Rexam was the top FTSE 100 gainer, up 7.4 percent after it put its underperforming personal care business up for sale and said it would look to return cash to shareholders, sending its shares to their highest level in nearly four years. Outsourcing firm Capita was also in demand ahead of full-year results due Thursday, up 6.5 percent supported by the award of a managed services contract for the training of British civil servants, worth 50 million per annum for 2 years.
US blue chips were also modestly lower by London's close, down 0.2 percent as concern over the weak euro zone data countered solid US existing home sales. "The improving housing and construction sector is another piece of evidence that the US is on the right track although market spectators will be looking closely for signs of the deteriorating economic picture in Europe affecting the progress in the United States," Jordan Lambert, trader at Spreadex.