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FTSE falls on global growth concerns

Wednesday, October 10 10:32:22

Britain's top shares edged lower today, tracking falls on Wall Street and in Asia on concerns over the global growth outlook, although gains in heavyweight miners and banks provided a floor under the FTSE 100 index around the 5,800 level. At 0805 GMT, the FTSE 100 index was down 12.45 points or 0.2 percent at 5,797.80, having shed 0.5 percent on Tuesday after the International Monetary Fund issued a downbeat view on global economic growth.

"There does not seem to be a great deal of conviction in the market ... There are a whole range of factors driving the market in the background, potentially one way or the other, with the results season just adding a touch of nerves after Alcoa's outlook downgrade," said Keith Bowman, equities analyst at Hargreaves Lansdown. Metals group Alcoa kicked off the U.S. third-quarter earnings season after Wall Street's close on Tuesday. The group's third-quarter profit beat market expectations, despite weak prices, but it lowered its global aluminium consumption outlook for 2012 mainly due to a slowdown of demand in China. Miners, however, shrugged aside the mixed message from Alcoa and led the FTSE 100 gainers with the sector focused on fresh signs of pro-growth policies by Beijing, the world's biggest consumer of many metals.

Chinese state-backed media today pointed to fresh policies to stabilise the world's second-largest economy. In one of the policies mentioned, China is likely to offer incentives to spur vehicle sales in rural areas to boost consumption and support a slowing economy. British banks were also in demand led by part-nationalised lenders Lloyds Banking Group and Royal Bank of Scotland, the top two FTSE 100 gainers up 3.5 percent and 2.3 percent respectively. Britain's Financial Services Authority has relaxed capital and liquidity rules on banks in an effort to stimulate lending and use bank regulation to moderate the economic cycle, the Financial Times reported today.

"These (RBS and Lloyds) are the two banks which are most exposed, along with Barclays. If they get a bit of leeway from the regulator, that's breathing space for these banks, which in short term is good for the shares. Longer term I stay very cautious," said Chirantan Barua, senior analyst at Bernstein Research. Stocks trading ex-dividend, where investors no longer qualify for the companies' latest dividends, knocked 2.87 points off the FTSE 100 index today, after the resulting adjustment to prices by market-makers.

Kingfisher, Smith and Nephew, Tesco, Wolseley and WPP Group were all trading without their dividend entitlements. Smith and Nephew was the biggest blue chip faller, losing 2.6 percent after Societe Generale restarted coverage on the orthopaedics firm's stock with a "sell" rating. "Given downside risk to the consensus EPS forecasts, an unappealing valuation, and an M&A overhang, we reinitiate coverage with a Sell rating. The upside risks are unlikely to alter our view until 2014," the broker said in a note. ( C) Reuters