Britain's FTSE 100 ended lower on Friday, halting a run of six weekly gains, as Spain's financial outlook took a fresh hit, pushing its yields to a new record high and hitting bank stocks across Europe. Royal Bank of Scotland, Barclays and HSBC were all down 2.5 percent to 3.5 percent, taking 14.5 points off the broader index after the sector slid in line with continental peers.
---- Vodafone takes 6 points off the index
The STOXX Europe 600 Banks index, which includes UK firms, ended down 3.7 percent, while the euro zone-focused index slid 6.1 percent after news that Spain's Valencia region was applying for a bailout from Madrid hit the country's bonds. "We saw the market coming back to the 5,600s as Spanish yields did not head south of 7 percent," Octopus fund manager Bish Limbu said. Until the region's permanent bailout fund, the ESM, is ready to buy Spanish bonds, Limbu said, "yields will continue to creep up like that and so equity markets will continue to fall when they do".
Weakness in the financials proved the main drag on the broader index, sending the blue-chip FTSE 100 down 62.42 points, or 1.1 percent, to 5,651.77 points. That late run into the red left the index down 0.3 percent for the week and meant it failed to chalk up a seventh straight week of higher closes, a feat last achieved in mid-2005.
British insurer Resolution led fallers across the index for most of the session, losing 5.4 percent in heavy volume at more than three times its 90-day daily average after it cancelled a planned share buyback. Leading bluechip Vodafone also suffered in the tough European trading conditions that have contributed to a series of weak corporate outlooks from across the region in the current earnings season.
Hurt by weak demand in debt-saddled Europe and an unexpected slowdown in emerging markets, it posted a sharp drop in quarterly growth and said it would launch a new round of cost cuts. At the same time as many firms are reporting cautious outlooks and defensive stocks remain popular, analysts at UBS suggested buying into sectors that could be early beneficiaries of any bottoming in the weak economic data.
Matthew Gilman, strategist at the bank, wrote that retail, leisure, housebuilders and media were all sectors that tended to perform well around the time of a trough in lead indicators. Within these sectors, UBS analysts' preferred picks include a couple of Friday's small group of gainers, William Hill, up 0.9 percent, and WPP, up 0.1 percent and which traded at almost 1-1/2 times its 90-day daily average.