London's FTSE 100 index finished the day firmly in the red as a barrage of earning reports from some European heavyweights disappointed and investors showed caution ahead of central bank policy decisions this week.
"The recent global risk rally fuelled by declarations of support for the Eurozone by the region's policymakers has started to show signs of fading as the reality of a deepening Eurozone economic contraction starts to grate on nerves," said Ishaq Siddiqi, market strategist at ETX Capital.
Investors were also showing caution following some strong gains over the past few days as markets hope for central bank action in the US and Europe this week. The Federal Reserve kicks off its two-day policy meeting today, while the European Central Bank (ECB) will reveal its decision on Thursday.
While the consensus is for the Fed to hold off on another round of quantitative easing (or QE3), people are looking for hints of further liquidity injections. David White, a financial trade at SpreadEx, said today: "investors will be most sensitive to contradictions of QE rather than just tentative affirmations, because the market has already to some extent priced in participants' logical extrapolation of comments already made by the fed. So long as the fed remains openly accommodative in light of worsening data points, markets will keep hoping."
Meanwhile, many are expecting the ECB to resume bond-buying after its President Mario Draghi said last week that the bank will do "whatever it takes to preserve the euro...and believe me, it will be big enough".
In other news, the GfK UK consumer confidence index was unchanged at -29 in July, in line with consensus forecasts.
FTSE 100: BP, Weir and RBS provide a drag
Weaker oil and gas prices and a cut in output due to an extensive maintenance programme hit BP's profits hard in the second quarter. Shares were down over 4% by the close.
Scottish engineering firm Weir tumbled after advising that full-year profits are likely to come in below market expectations if there is no pick-up in the upstream Oil & Gas markets.
Shares of UK lender RBS were sold off after The Wall Street Journal reported that a settlement with authorities regarding attempted LIBOR-fixing may be announced in the next few months. The paper said that pressure could start to mount on the group's CEO Stephen Hester to leave.
Yet the worst performer today, by far, was CRH, on the back of negative read-across from german peer Heidelberg Cement.
Mining stocks on the other hand were higher, with even Fresnillo swinging into the blue after a sharp fall early on. The precious metals group said that it was hit by the falling price of silver and reduced ore quality, leading to a significant fall in first-half profits.
Meanwhile, Polymetal, Vedanta and Xstrata impressed with their second-quarter and first-half production reports this morning.
FTSE 250: Elementis leads risers, Petra disappoints
Results from speciality chemicals group Elementis galvanised the share price after the cash-rich group announced plans to return surplus funds to shareholders on a regular basis. Profit before tax in the first half of 2012 rose 12% to $79.0m from $70.6m the year before, on the back of a marginal improvement in revenue to $401.3m from $396.0m in the first half of 2011. ??
Petra Diamonds slumped despite full-year revenues jumping, as the company said that the rough diamond market is "expected to remain under pressure in the short term".
FTSE 100 - Risers
Vedanta Resources (VED) 976.00p +5.17%
Sainsbury (J) (SBRY) 323.30p +0.87%
Unilever (ULVR) 2,291.00p +0.75%
Glencore International (GLEN) 320.15p +0.55%
Pearson (PSON) 1,196.00p +0.50%
G4S (GFS) 247.90p +0.45%
Xstrata (XTA) 848.10p +0.44%
Rio Tinto (RIO) 2,946.50p +0.32%
GlaxoSmithKline (GSK) 1,468.50p +0.24%
SSE (SSE) 1,313.00p +0.23%
FTSE 100 - Fallers
CRH (CRH) 1,160.00p -5.77%
BP (BP.) 425.05p -4.36%
Shire Plc (SHP) 1,848.00p -3.90%
Royal Bank of Scotland Group (RBS) 213.70p -3.83%
Sage Group (SGE) 287.50p -3.81%
Intertek Group (ITRK) 2,734.00p -3.80%
Burberry Group (BRBY) 1,254.00p -3.24%
Tullow Oil (TLW) 1,290.00p -3.23%
Rolls-Royce Holdings (RR.) 850.50p -3.08%
Weir Group (WEIR) 1,655.00p -2.88%
FTSE 250 - Risers
Dignity (DTY) 892.00p +5.56%
Elementis (ELM) 210.00p +5.00%
Bumi (BUMI) 356.10p +4.00%
Domino Printing Sciences (DNO) 552.50p +2.79%
Tullett Prebon (TLPR) 273.00p +2.13%
Kenmare Resources (KMR) 37.47p +1.90%
BlackRock World Mining Trust (BRWM) 559.00p +1.82%
Daejan Holdings (DJAN) 3,001.00p +1.76%
RPS Group (RPS) 242.00p +1.60%
Rathbone Brothers (RAT) 1,290.00p +1.57%
FTSE 250 - Fallers
Bwin.party Digital Entertainment (BPTY) 102.80p -6.80%
The FTSE 100 was continuing to trade within an extremely tight range on Thursday morning as investors consider how much further the rally will go given that the index is already trading at levels not seen in five and a half years. [Thu 11:34]
Severn Trent topped the leaderboard after it confirmed press speculation that it has received a bid approach from a consortium of investors, which is rumoured to value the UK utility company around 5.3bn pounds. In a statement released this morning, Severn Trent said it had received an approach with a view to making a proposal from Canadian infrastructure investor Borealis, the Kuwait Investment Office and Universities Superannuation Scheme. [14 May '13]
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