Miners drag on FTSE 100

Britain's FTSE 100 fell on Monday, as weakness in miners and engineers outstripped strength in defensive stocks after China cut its growth forecasts, while mixed economic data in Europe and the United States dimmed the outlook for global growth. London's blue chip index shed 36.31 points or 0.6 percent to 5,874.82, although it held within its recent tight range between 5,830 and 5960, in place since early February.
Volumes were weak and implied volatility rose 3.3 percent, suggesting concern had returned among investors, although the level remained at less than half the multi-year peaks set in September 2011.
Weighing on the FTSE 100 was the announcement that China, the world's most voracious consumer of raw materials, had cut its official growth target for 2012 to an eight-year low of 7.5 percent. "Chinese economic growth is an assumption that many investors have come to rely on and so anything less than perfection will be badly received," David Miller, partner at Cheviot which has assets under management of about 3.5 billion pounds.
A softening of growth in the world's second-biggest economy is bad news for the demand outlook for miners, which fell in tandem with base metals. Global miner BHP Billiton, the FTSE's second-biggest stock by market cap, fell 2.9 percent, while auto and plane parts maker GKN, which was looking to China as a key driver of demand for premium cars this year, fell 2.0 percent.
Commodities trader Glencore shed 4 percent as the firm reported in-line full-year results and stuck to its guns over proposed merger terms with Xstrata. Xstrata slipped 4.9 percent, but brokerage Killik said it likes the Glencore-Xstrata merger due to the ability to benefit from increased economies of scale in terms of project development, M&A clout, marketing and purchasing, while its preferred means of getting exposure to the combination is through Xstrata.
Kazakhmys was down 4.9 percent as BofA Merrill Lynch and HSBC cut their respective ratings to "neutral", with the former concerned over the risk to the Kazakh miner's earnings because of declining grades and local cost inflation. News that the eurozone's private sector shrank last month and Britain's dominant services industry expanded less than forecast, added to the economic gloom.
Mixed US economic data also muddied the global growth outlook. That did little to improve sentiment surrounding engineers such as Weir and IMI, down 4.7 and 1.7 percent respectively. Weir was already under pressure after Citigroup downgraded its rating for the pumps manufacturer to "sell" from "neutral" following recent full-year 2011 results.
Serco shed 5.9 percent as BofA Merrill Lynch downgraded its rating for the outsourcing group to "neutral" from "buy", following recent full-year results, on valuation grounds. Banks were also lower, weighed down by concerns of an outright default for Greece.
The country's Finance Minister, Evangelos Venizelos, warned Athens was ready to enforce losses on Greece's private sector creditors if they do not accept the country's debt swap offer, which traders said would almost certainly trigger credit default swaps on its bonds. Preventing the UK's benchmark index from falling further was strength in defensive stocks, such as drugmaker GlaxoSmithKline and utility Centrica up 1.0 and 1.3 percent respectively.
BP, the fifth-biggest stock on the FTSE, was up 1.6 percent after it reached an estimated $7.8 billion settlement with businesses and individuals affected by the Gulf of Mexico oil spill, lifting some of the uncertainty overshadowing the oil giant's outlook. Oil services firm Petrofac gained 1.3 percent after posting a forecast-beating 25 percent jump in yearly profit. Testing firm Intertek climbed 2.5 percent after saying full-year profit surged 23 percent, beyond expectations.