FTSE drops back on growth, euro zone concerns

LONDON (Reuters) - FTSE 100 dropped back sharply on Wednesday, tracking a reversal on Wall Street and losses overnight in Asia, led by weak miners and banks, pressured by global growth worries and signs that Spain's economic crisis is worsening.

At 08:56 a.m. British time, the FTSE 100 index was down 52.14 points, or 0.9 percent, at 5,807.57, holding above the psychologically important 5,800 level, having gained 0.4 percent on Tuesday in tandem with an early advance on Wall Street.

However, U.S. blue chips turned around late on Tuesday, shedding 0.8 percent, while the broader S&P 500 suffered its worst day since June as investors focused back on growth concerns ahead of the end of the third quarter and start of the next corporate earnings season.

"Caterpillar's profit outlook cut late on Monday has awakened investors to worries about third-quarter earnings, which are just around the corner, and that coupled with negative comments on QE3 from the Philly Fed chairman has precipitated a big retreat by equity markets," said Mike Mason, senior trader at Sucden Financial.

Philadelphia Fed President Charles Plosser said on Tuesday the Fed's third round of quantitative easing (QE3) will not do much to boost economic growth or lower unemployment and raises the risk of longer-run inflation.

Commodity issues suffered the most from worries that stalling global growth will stunt demand for metals and crude oil, with miners the worst off, accounting for around 10 points of the FTSE 100 index's total decline.

Energy stocks were close behind, knocking over 6 points off the blue-chip index.

Banks were also big fallers, led by Royal Bank of Scotland which was down 2.9 percent, with concerns over the euro zone debt crisis again to the fore and the sector heavily exposed to sovereign debt in the region.

Spain's Prime Minister Mariano Rajoy on Wednesday said he was ready to seek a new rescue package for his troubled country but only if its debt financing costs remain too high for too long.

RSA EX-DIV

RSA Insurance was the biggest FTSE faller, down 3.6 percent, as the stock traded ex-dividend.

Stocks trading without the entitlement to their latest dividend payout clipped 1.73 points off the FTSE 100 index, after the resulting adjustment to prices by market-makers, with Centrica and WM Morrison also trading ex-dividend on Wednesday.

There were no FTSE 100 gainers. However, in spite of the sharp market falls, Phil Roberts, chief European technical strategist at Barclays Capital, still saw some reasons to be positive.

"What we've seen for the last four months is a choppy uptrend and I think we're just in the down-leg of that," Roberts said.

"Essentially we're staying bullish strategically above the 200-day moving average (at 5,691). Can we come out of the range that we've been in for the last week (to the downside)? Yes, absolutely."

(Reporting by Jon Hopkins; editing by Stephen Nisbet)

Source: http://news.yahoo.com/ftse-drops-back-growth-euro-zone-concerns-071554100--finance.html

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