LONDON: Britain's leading share index retreated from five-year highs on Wednesday as investors took profit at a key resistance level and a weak auction of Italian bonds revived worries about the euro zone debt crisis.
The FTSE 100 was down 67.91 points or 1 percent at 6,442.51 points by 1204 GMT, after failing to break above its January 2008 high at around 6,534 the previous day.
That suggested buying momentum was starting to falter and some investors were positioning for a pullback.
The index's 14-day Relative Strength Index was retreating from "overbought" territory after hitting a high last seen in early February, when it was also followed by a selloff.
Traders said political uncertainty in Italy and tricky fiscal talks in the United States remained two possible catalysts for a pullback.
Dan Reed, a trader at HB Markets, said his clients had taken negative or short, positions on the FTSE on Tuesday and were likely to hold them even if the index were to rise again to the 6,530 area.
"With an analogy, it's very humid and it feels like we need a bit of a thunderstorm to clear it out a little bit," Reed said.
"We might get it later in the week or early next week with Italy or towards the end of the month if we get any fiscal issue with the US"
The FTSE extended losses in morning trade after demand fell and borrowing costs rose at a debt auction in Italy, where political parties are struggling to form a government after an inconclusive election late last month.
Also weighing on the index were stocks starting to trade without entitlement to their latest dividend on Wednesday, including heavyweights British American Tobacco and Standard Chartered.
PROFIT TAKING
Profit takers focused on stock that had outperformed the market in recent weeks including security firm G4S, which fell 3.6 percent from its all-time high in volume nearly equal to its full-day average for the past 90 days.
The security firm released solid results on Wednesday, but a 20 percent rise in its shares since the start of the year meant that was already priced in.
Global bank HSBC fell 1.5 percent after testing a two-year high at around 739 points in the previous day.
"The stock has performed very strongly and is the most secure UK bank listed bank," a London-based broker said.
"That said, the proportion of revenue generated in China is growing rapidly. If we do get a Chinese slowdown, which I believe we will, then I think the stock heads back to around 650 pence."
HSBC trades at 1.2 times its book value, a premium to European-based global lenders such as BBVA, Santander and UBS at between 0.8 and 1.1, StarMine data showed.
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