Britain's top shares fell on Monday on concern about prospects for global growth, with a murky outlook for metal demand from top consumer China shunting miners to the top of the fallers' list. The FTSE 100 closed down 32.97 points, or 0.5 percent, at 6,345.63, albeit still within sight of a five-year peak of 6,412.44 struck on February 20, with the mining sector off 2.6 percent - trading around three-month lows.
--- HSBC down 2.5 pct on results miss
Sentiment in the mining sector, already dented on Friday by poor Chinese manufacturing data, was exacerbated by worries over Beijing tightening its grip on the property sector - which has the potential to stunt the country's demand for raw materials. Kazakhmys led the market lower, continuing a slide seen since Thursday when it warned of sharply higher costs.
Its shares sank 5.9 percent as Deutsche Bank became the latest investment bank to weigh in on the copper miner, cutting its target price to 650 pence. Anglo American, meanwhile, shed 2.7 percent as Nomura cut its rating on the firm to "reduce" citing valuation grounds and viewing consensus earnings as too high for 2013.
Banks suffered too, with heavyweight HSBC off 2.5 percent, alone accounting for 13.1 points of the FTSE 100's drop, after it posted a pretax profit of $20.6 billion for last year, missing analyst expectations. Also hurting broad market sentiment were concerns about US budget cuts - known as the "sequester" - which threaten to curb growth in the world's biggest economy, and over political instability following Italian elections, which has fuelled fears of a return of the euro zone debt crisis.
Having jumped some 22 percent over the nine months to its February peak, boosted by the European Central Bank's promise to defend the euro, the UK benchmark has been stuck in consolidation mode, trading within a 200-point range. "I think you've got to stick with it, ride it out, and wait for the good times to return, as it were," Peter Dixon, economist at Commerzbank, said.
"I think primarily what we're looking for here is a recovery in confidence, and once you start to see some small (improvements) coming through, in the UK and elsewhere, you might start to see a bit more impetus back in equity markets." While the UK benchmark stays below 6,400, GFT Markets technical analyst Fawad Razaqzada is keeping his neutral stance, but a decided break above this level would give it "the potential to gain another 200 or so points before making its next move".
Retailer Next was another significant faller, off 2.5 percent, on a read-across from mid-cap peer Debenhams, which delivered a first-half profit warning on Monday, sending its shares 14.7 percent lower. Traders also cited a UBS downgrade to "neutral" on Next as a catalyst for its share price weakness, in a note in which the investment bank cut its stance on European general retailers to "neutral" as well.
Defensive stocks such as utilities and drugmakers, providers of life's essentials which consequently tend to be in demand even in harsh times, found favour, limiting the index's falls. Drugmaker Shire added 0.8 percent, British American Tobacco firmed 1.6 percent, and Imperial Tobacco rose 0.7 percent. Centrica, ahead 1.8 percent, was also buoyed by an upgrade to "buy" from Societe Generale, which highlighted the utility's attractive valuation, balance sheet strength, and cash generation.