FTSE led lower by miners on demand worries

LONDON: Britain's top shares fell on Thursday, led down by miners on concerns over further fiscal tightening in China, and banks on nagging worries over the Europe's debt situation.

The benchmark FTSE 100 index was down 55.38 points, or 1 percent, at 5,276.22 by 0818 GMT, having shed 0.5 percent on Wednesday.

Trading will likely to be volatile ahead of the expiry of monthly futures and options on Friday.

"The FTSE is trying to find a level ahead of option expiration tomorrow. It is more about the positioning of the large derivatives books over the next 24 hours than anything else," said Lex van Dam, hedge fund manager at Hampstead Capital, which has about $500 million of assets under management.

"Unless you have a view on that, it might be wise to stay on the sidelines for now," he said.

Miners retreated after gains in the previous session, with the sector dented by weaker copper prices and investor anxiety over a potential interest rate rise in top consumer China after a rise in its central bank's bill yields.

Adding to the glum demand picture, economists at Deutsche Bank have downgraded their 2011 and 2012 growth forecasts for China.

And Morgan Stanley has cut its forecast for global growth, citing "recent policy errors" in the United States and Europe, plus prospects of further fiscal tightening in 2012.

Kazakhmys was worst off, down 2.8 percent, while Rio Tinto shed 2.1 percent, and Vedanta Resources fell back 1.9 percent.

Eurasian Natural Resources bucked the weak sector trend, climbing 0.5 percent, having also outperformed its peers on Wednesday after posting first-half profit at the top end of expectations.

The Financial Times reported on Thursday that a criminal case involving the three billionaire shareholders behind ENRC has been settled.

Technology firms were hit as downbeat earnings releases after Wall Street's close on Wednesday soured sentiment in the sector, already knocked by US computer maker Dell's disappointing sales outlook issued after-hours on Tuesday.

Chip designer ARM Holdings fell 1.8 percent, while business software firm Sage Group slipped 1.3 percent following news that tech firm NetApp Inc's revenue missed expectations and JDS Uniphase issued a weak first-quarter outlook.

Financials extended their falls from the previous session when a summit between the French President and German Chancellor failed to calm nerves about the euro zone debt crisis and left investors anxious about the impact of plans for a new tax on the industry.

Barclays topped the blue-chip fallers' list, off 3.4 percent, while Royal Bank of Scotland dropped 2.5 percent.

Traders said volumes would likely remain subdued in the near term, as the coming weeks contain very little in the way of important news flow, with the latest earnings season largely over.

"It's massively quiet ... There's no risk appetite out there really," said Yusuf Heusen, senior sales trader at IG Index.

"There's no volume going in the market, and these are typically the slowest two weeks of the year for me, apart from Christmas. Any move's going to be exaggerated. The problem is there's a massive risk to the downside if there's bad data."

Copyright Reuters, 2011