Britain's leading shares dipped in low volume on Monday as concerns over the costs of Hurricane Sandy in the United States added to uncertainties about future corporate earnings. Many investors were sticking to the sidelines ahead of a pick-up in the UK third-quarter earnings season this week, notably from the energy and banking sectors.
Insurers were among the big fallers on hurricane costs worries, while energy stocks were dented by a drop in crude prices as the storm saw refineries on the US eastern seaboard shut. Ai r line shares fell on concerns over flight disruptions. The FTSE 100 closed down 11.61 points, or 0.2 percent at 5,795.10 points, in volume of 60 percent of the 90-day daily average, reflecting the absence of US trading interest with US stock markets closed because of the hurricane threat.
Bluechips rallied from earlier lows, however, with technical factors helping explain the index's recovery, although overall caution remained. "A snap-back rally is possible as the indices are trading outside a volatility band, which often occurs after a short-term pullback as seen recently. However, short-term trends have turned bearish and weakness is likely to continue," said Sandy Jadeja, chief technical analyst at City Index.
The FTSE 250 index ended down 0.1 percent, weighed by falls in Lloyds of London insurers such as Amlin, Hiscox, Catlin and Lancashire, which shed around 1.7 percent on Hurricane Sandy exposure worries. The impact of the storm provided another worry for investors already concerned about a relatively glum third-quarter earnings season, with a third of UK companies so far having missed expectations.
Weakness in oil major BP, down 1.6 percent, before it kicks off the UK sector's third-quarter reporting season on Tuesday, accounted for almost 5 points, or about half of the blue-chip index's decline. But banks saw some support after earlier falls as investors positioned themselves ahead of trading updates from Barclays, Lloyds and RBS this week.
"Overall earnings have been a bit disappointing, especially from the large companies ... But standing away from the index, and just looking at a company-by-company basis we are starting to get a lot more optimistic that upgrades are in the ascendancy relevant to downgrades," said Henry Dixon, manager of the IM Matterley Undervalued Assets Fund.
Matterley has around 151 million pounds in assets under management. Citigroup prompted the top FTSE 100 riser and faller on Monday after changing its recommendations on both shares. Hargreaves Lansdown shed 4.2 percent after the US bank downgraded its rating for the financial services firm to "sell" from "neutral", and cut its earnings forecasts.
Hargreaves was the second most-traded FTSE 100 stock, after insurer Old Mutual, with both seeing volume of over three times their respective 90-day daily averages. Accountancy software firm Sage Group, however, rose 1.8 percent after Citigroup upgraded its recommendation to "buy" from "neutral" in a broader note on UK technology shares.
Property shares were also in demand following broker comment, led by Hamerson up 1.3 percent, as Deutsche Bank raised target prices in a sector review. "With inflation risks rising we believe that generalist equity investors and financial sector funds should buy property shares as an inflation hedge," the bank said in a note.