By Michael Taylor
LONDON, Jan 7 (Reuters) - Britain's leading shares ended
down 0.2 percent on Monday, reversing earlier gains, as fears of
a U.S. recession lingered and miners dragged on trading.
The FTSE 100 <.FTSE> was 12.8 points lower at 6,335.7 after
earlier touching a high of 6,376.5.
The blue-chip index dropped 2 percent on Friday when U.S.
jobs data stoked fears that the world's largest economy was on
the brink of recession. U.S. stocks fell on Monday as concerns
over the economy refused to go away.
"We've seen some impressive falls in the U.S. markets and
that's just dragged the FTSE down with it," said David Jones,
chief market strategist at IG Index.
"Everything is just doom and gloom. We came out of last year
fairly negative...we've kicked off this year with weak
expectations from the retailers."
"There is nothing for the market to pin any hope on - any
rally is proving to be short-term and everyone is just worried,"
he added. "It's all looking a bit grim out there really."
Miners weighed on the index as Anglo American <AAL.L> fell
4.7 percent after the Sunday Telegraph reported the mining group
had postponed plans to sell its 3 billion pound Tarmac
road-covering business until turmoil on capital market eases.
With base metal prices down, other sector stocks to suffer
included Xstrata <XTA.L>, Rio Tinto <RIO.L> and BHP Billiton
<BLT.L>.
UK housebuilders also pulled the index south, with Taylor
Wimpey <TW.L> and Persimmon <PSN.L> down 5.5 to 7.3 percent as
analysts and traders pointed to negative expectations ahead of
company results and a rate decision from the Bank of England,
which is likely to yield no easing in monetary policy.
Persimmon and Taylor Wimpey are both due to release final
trading updates on Wednesday and next Tuesday, respectively.
Ahead of Thursday's BoE interest rate decision, most
economists expect borrowing costs to remain at 5.5 percent this
month, according to a Reuters poll.
But on the upside, positive broker notes and high U.S. crude
prices <CLc1.L> boosted oil and pharmaceuticals sectors.
Oil fell to below $95 a barrel as unseasonably warm weather
and worries of a looming recession in top oil consumer the
United States outweighed fresh tensions between Iran and
Washington.
BP <BP.L> added 1.5 percent and rival Shell <RDSa.L> gained
1.8 percent, benefiting from price target upgrades from ING,
which also raised its rating on France's Total <TOTF.PA> to
"buy" from "hold".
On Friday, strategists at Citigroup raised their rating on
the energy and pharmaceutical sectors and traders said this was
buoying stocks such as GlaxoSmithKline <GSK.L> and AstraZeneca
<AZN.L>, where were up 3.5 percent and 2.8 percent respectively.
"In the last few months of 2007, the market almost ignored
high oil prices when everything was booming," said IG's Jones.
"But since we've seen (markets) take a knock with the credit
crunch, they've started focusing again on the other fundamental
factors."
"This has just added to the woes of the market."
Nuclear power firm British Energy <BGY.L> rose 6 percent to
top the FTSE 100 leaderboard as a trader and an analyst cited
expectations of British government approval on Tuesday for a new
generation of nuclear power stations.
The decision is likely to be accompanied by the publication
of an Energy Bill.
One London trader also said Cazenove had issued an upbeat
note on the stock and raised its price target.
Further on the downside, Schroders <SDR.L> lost 6.3 percent
after Citi cut its rating on the fund manager to "sell"" from
"hold".
Sainsbury's <SBRY.L> and Marks & Spencer <MKS.L> fell about
3.7 percent after a report in the Times said the two retailers
may disappoint investors with their next trading updates, due
later this week.
"It looks like the first reports on the retailers have been
pretty soft. We are about to see some more reports out of
Sainsbury's and next week from Tesco <TSCO.L>," said John
Haynes, strategist at Rensburg Sheppards Investment Management.
"These guys could give us a bit more of a handle, they are a
bigger portion of the pie and ... more core to the retail
picture than most of the ones that have reported."
Last week, DSG International <DSGGI.L> and Next <NXT.L>
issued downbeat outlooks, raising worries about the resilience
of British consumer spending.
(Additional reporting by Ana Nicolaci da Costa and Rebekah
Curtis) (Editing by David Cowell)
(([email protected]; +44 207 542 0919; Reuters
messaging: [email protected]))
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