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Weak company earnings hits FTSE

Friday, October 26 12:04:40

Concerns over weak company results sent British blue-chip shares lower today, and traders said the difficult corporate and economic environment made the market prone to a bigger sell-off.

The benchmark FTSE 100 fell by 0.7 percent, or 38.25 points, to 5,766.80 points by around midday.

Although data on Thursday showed Britain exited recession in the third quarter with stronger-than-forecast growth of 1.0 percent, many investors expect the UK economy to remain weak. Underscoring the tough climate, bellwether retailer John Lewis reported a slowdown in sales growth on Friday, while a fall in the price of copper caused UK mining shares to slip lower.

"With the way the earnings season is going, this correction could continue," said Central Markets chief strategist Richard Perry. According to Thomson Reuters Starmine data, 32 percent of the companies on Britain's broader FTSE 350 index have missed expectations for their third-quarter earnings. Mining company African Barrick Gold downgraded its 2012 production forecast on Friday, sending its shares down by 3.8 percent, while chemicals maker Elementis slid 6.2 percent after warning of a hit to full-year profits. Technical analysis also shows that the FTSE 100 index is under pressure. The index is edging closer to the 200-day simple moving average at around 5,720 points, and a drop below that level would be taken by many traders as a signal to sell off the market.