Britain's top share index fell in light, choppy trade on Wednesday, pressured by heavyweights such as BP trading ex-dividend, and miners and broadcasters after analysts cautioned against further upside to recent sector gains. London's blue chip index closed down 7.71 points or 0.1 percent at 5,892.16. The FTSE 100 has barely moved outside of the range between 5,850 and 5,900 since February 3.
Ex-dividend factors weighed heavily on the FTSE 100, with drugmakers AstraZeneca and GlaxoSmithKline, oil majors BP and Royal Dutch Shell, and consumer products group Unilever all losing their payout attractions. Miners fell in tandem with base metal prices, against the backdrop of mixed US economic data, and after Citigroup switched to a bearish stance on the sector, which has rallied 30 percent since late 2012, on a three-to-six month view.
Citi said gains had been driven by a price-to-earnings expansion rather than earnings upgrades, and the broker believed the beta rally will run out of steam as spot commodity prices still point to earnings downgrades. Anglo American fell 3 percent as Citigroup downgraded the miner to "neutral" from "buy", on valuation grounds.
"We think now may be a good opportunity for investors to take some profits (in Anglo American), given several operational challenges and a relatively unattractive valuation," it said, Anglo American's share price has rallied 26 percent since its 12-month low of 2,138 pence on October 4, which Citi said is due partly to widespread speculation of corporate action.
European broadcasters were weak with ITV, off 1.5 percent, as Deutsche Bank turned more negative on the sub-sector in a review, citing a turn in the cycle. "The lesson of prior cycles is to own the broadcaster stocks in the early phase of any market rally. Thereafter underperformance sets in and these are not stocks to own through the cycle," Deutsche Bank said.
Banks were the standout performers, after forecast-busting results from French peer BNP Paribas and a pledge by China that it will keep investing in euro zone debt boosted sentiment in the sector. Barclays rose 2.8 percent as West LB and Citigroup raised their respective target prices on the UK lender following its recent results, with the latter saying "positive near-term earnings momentum in first-quarter 2012 should continue to support the stock".
A banking analyst at a top investment bank said financials' outperformance was likely being driven by hopes that China's support would be enough to prevent a collapse of the financial system as Europe pondered the delay of the second Greek bailout programme, and ahead of the G20 finance ministers summit meeting next week.
"If you play the summit game you go long banks into the summit and then close it out on the day or just before and you can generally make a lot of money doing that," the analyst said. Other financials climbed too, with emerging markets focused fund manager Ashmore up 2.8 percent, taking its 2012 gains to more than 17 percent, and interdealer broker ICAP 3 percent higher.
Volumes remained light - the FTSE 100 traded just 82 percent of its 90-day average - and the UK's benchmark remained in a tightly bound range. MAM fund manager Simon Callow said he was very cautious on the FTSE 100 in the medium term, adding it will struggle to break out of the 6,000 level before July, hampered by concerns about Greek austerity measures.
He has been taking money out of the fund's equity pot, locking in profits in life insurers and oil services companies after a period of strong performance and betting instead on bonds. "(The austerity measures) can be agreed at the top level in Greece, but the population (might) not carry the agreement, and that's what's scaring the market now I think," said Callow, manager of the CF Midas Balanced Growth Fund, which has 224 million pounds ($351.53 million) of assets under management.