FTSE 100 retreated from a three-week high on Monday on concerns about the pace of global economic growth, with cyclical sectors such as miners and banks worst hit.
The blue-chip FTSE 100 index was down 0.5 percent at 6,832.16 points by 1407 GMT after climbing to its highest since early June in the previous session. The index gained 1.6 percent last week, its best weekly performance since May.
Investors cut their
equities trading positions after data on Monday showed German industrial
output fell 1.8 percent on the month in May, its biggest drop in more
than two years. "The market appears to be in a consolidation phase as weaker-than-expected economic numbers from Germany
have raised some concerns regarding the strength and sustainability of
the recovery in Europe," HSBC equity strategist Robert Parkes said. Miners
featured among the top decliners, with weaker metals prices and
concerns about global growth prompting investors to take some money off
the table after a recent rally. IMF
chief Christine Lagarde said on Sunday that global economic activity
should strengthen in the second half of the year and accelerate in 2015,
but momentum could be weaker than expected, hinting at a slight cut in
the Fund's growth forecasts. "The
IMF's comments are weighing on miners as investors are taking that as
an excuse to take some profits after strong gains in recent days," IG
analyst Chris Beauchamp said.
The UK mining index fell 0.7 percent. Other cyclical sectors also drew
selling, with the UK banking index falling 0.8 percent and the mobile
telecom index down 0.7 percent. Limiting the FTSE's losses was engineering
group Weir, which rose 1.4 percent to top the FTSE gainers' list after
Citi upgraded it to "buy" from "neutral", saying its oil and gas
opportunities were underappreciated. Despite some weakness in the broader market, analysts said the slight market pullback could prove to be short-lived. Charles
Stanley technical analyst Bill McNamara said that while the FTSE has
been struggling to break above 6,900 points since the start of the year,
it is still displaying strong upside momentum. "The
broader technical picture is suggesting that a test of the 1999
all-time (closing) high, at 6,930, might not be too far away now," he
said.
