UK's top share index falls

A downgrade for Spain's credit rating, violence in Libya and weak data from China and the U. heaped pressure on Britain's top share index on Thursday, with traders speculating that there could be more woe to come. "It's an unholy triumvirate of bad news," Chris Purdy, trader at Spreadex, said. Purdy pointed to the three-month low of 5,795 as the next significant support level as the FTSE 100 closed down 92.01 points, or 1.6 percent, at 5,845.29, a fresh year low.
He said the index had plunged through the support barriers he was expecting and it was anyone's guess how much further the sell-off might go. London's blue chip index also fell below 5,881, the 38.2 percent Fibonacci retracement from the November 30 low to the late February high. But it bounced off 5,833.23, with the next key retracement level - 50 percent - at 5,812.
Banks were weaker as risk appetite remained off the menu for investors after Moody's cut Spain's sovereign credit rating a notch to Aa2 and warned of further cuts. Barclays, which has a big exposure to Iberian debt, fell 1.3 percent. The Bank of England's Monetary Policy Committee kept interest rates at a record low of 0.5 percent, but traders noted sentiment on the committee is shifting.
"(The) announcement was perhaps taken for granted, but after minutes showed another policymaker shifting camps last month, with three now favouring a rate hike (and one for 50bps), this could be the last of the low rates," Spreadex's Purdy said. Brent crude traded above $114 a barrel, near 2-and-a-half year highs, as military activity intensified in Libya.
Miners fell with base metal prices, as high oil prices threaten to derail the global economic recovery. Weak Chinese import data also weighed on the sector, casting doubt on demand from the world's biggest metals consumer. Rio Tinto shed 3.8 percent after raising its bid for Africa-focused coal miner Riversdale Mining to $3.9 billion.
A rise in US claims for unemployment benefits added to woes. Energy shares also creaked under the pressure, but Henry Dixon, fund manager of the 25.2 million pound S&W Matterley Undervalued Returns fund, sees value in big-cap oils. "It's astonishing how cheap some of the large-cap oils stocks are, which have been muddied by the BP situation." "Because of the corporate balance sheet, the market gets cheaper on any pull-back. Another 200 points from here and you are buying the market on better value than March 2003."
On the upside, drugmaker GlaxoSmithKline rose 0.3 percent after US regulators approved Benlysta, a treatment for lupus. Smaller peer Shire climbed 1.6 percent on an upgrade by Morgan Stanley, while orthopaedics firm Smith & Nephew gained 0.5 percent. Healthcare-related companies were helped by their defensive nature and early 2011 contrarian trade.
Results and plans for a cash return to shareholders lifted Wm Morrison Supermarkets 1.6 percent. Insurer Standard Life and temporary power supplier Aggreko each fell around 7 percent after results, while Chipmaker ARM shed 9 percent after its US customer Texas Instruments issued a weaker-than-expected outlook.