Britain's top shares fell on Friday after a choppy session as anxiety over US budget negotiations took its toll on investor sentiment. The FTSE 100 shed 18.35 points, or 0.3 percent, to 5,939.99, having lost as much as 1.1 percent after US Republicans rejected party leader John Boehner's proposal aimed at winning concessions from President Barack Obama in the talks.
--- Carnival picks up as Deutsche Banks stays positive
The failure of Boehner's plan leaves US politicians facing $600 billion worth of tax hikes and spending cuts at the start of 2013 that could tip the economy into recession. "It looks like... they are going to leave it until the last minute. Now of course that means investors are going to have to second-guess what's going on. It's going to be particularly volatile; we've seen that in the last 24 hours," Angus Campbell, head of market analysis at Capital Spreads, said. But the UK benchmark ended the week back within sight of a nine-month high of 5,977.82 hit on Wednesday, in a sign that investors reckon a deal will be hammered out.
"(There's) disappointment that the Republicans' bargaining stance has weakened, but I don't think this is the kind of move that you would get that indicates that we are a lot further away from a deal," said Guy Foster, group strategist at Brewin Dolphin. UK banking stocks were among the top fallers on Friday, off 0.5 percent, after a parliamentary report warned the sector may need tougher regulation. Lloyds Banking Group and Barclays were hit hardest, losing 1.9 percent and 1.4 percent respectively.
Elsewhere, Kazakhstan-focused miner ENRC shed 1.4 percent, with traders citing the impact of a Goldman Sachs downgrade of its rating to "neutral" from "buy". "We believe the stock may trade sideways until the market regains confidence in ENRC's execution... and capital allocation decisions, particularly cash returns to shareholders," Goldman said in a note. The bank also pointed out that to meet the liquidity requirement to maintain inclusion in the FTSE 100 index, ENRC must make a share placement in 2013, raising cash but also weighing on its share price in the near term.
On the upside, cruise operator Carnival gained 2.1 percent, recovering some of the previous session's steep losses following a cautious 2013 outlook and helped by Deutsche Bank staying positive on the stock. "We think management is being overly conservative with its guidance given current US 'fiscal cliff' noise and shorter booking window," Deutsche Bank said in a note, reiterating its "buy" rating and 2,930 pence price target on Carnival. "We have retained our forecasts and we would expect company net yield guidance to rise to our forecast as we move through H1/13", the bank said. "We ... would use any near-term share price weakness as a buying opportunity."