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FTSE sheds 1.2 pct; US jobs data spooks investors

Published 10/02/2009, 12:01 PM
Updated 10/02/2009, 12:03 PM

* FTSE 100 below 5,000 for first time since Sept. 10

* U.S. non-farm payrolls weaker than expected

* Miners, oils, banks fall as risk appetite dries up

By Jon Hopkins

LONDON, Oct 2 (Reuters) - Britain's leading share index shed 1.2 percent on Friday, led by falls from heavyweight banks, miners, and oils after September's U.S. jobs report fuelled fears that a weak labour market could undermine economic recovery.

At the close, the FTSE 100 was 59.11 points lower at 4,988.70, logging a fourth straight session of losses.

"The FTSE closed below the psychologically important 5,000 level for the first time in over three weeks and this could also highlight a turning point in the markets," said Joshua Raymond, Market Strategist at City Index.

"If we fail to break through this level (again) quickly, considering how strong equities have rallied over the last six months, we could be set for a 'health check' correction."

U.S. blue chips were 0.2 percent lower by London's close, albeit having pared earlier losses made after U.S. employers cut a deeper-than-expected 263,000 jobs in September, lifting the unemployment rate to 9.8 percent.

Banks, which have been at the heart of the financial crisis, were the biggest fallers as nervous investors plumped for less risky plays. Royal Bank of Scotland, Lloyds Banking Group, Barclays, HSBC, and Standard Chartered lost 1.5 to 7.7 percent.

Miners also suffered as worries about the fragile state of the global economic recovery caused fresh demand concerns and put pressure on metal prices.

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Kazakhmys, Vedanta Resources, Lonmin, Rio Tinto shed 2.2 to 4.9 percent.

Xstrata lost 2.1 percent as UK regulators said it must make a formal bid for rival miner Anglo American -- off 0.5 percent -- by Oct. 20 or walk away for six months as Anglo again rejected a merger.

Energy issues dropped as crude prices fell by over $2 a barrel, with BP, Royal Dutch Shell, BG Group, and Cairn Energy shedding 0.3 to 3.3 percent.

Investors took the opportunity to book profits in Legal and General, down 3.2 percent, shares in which have risen over 25 percent since Monday on bid talk, with either Resolution or an Australian firm touted as a predator.

Goldman Sachs removed L&G from its "Conviction Buy" list on Friday citing the strong gains made this week.

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SABMiller topped the blue chip risers, up 2.4 percent, supported by positive comment from Cazenove, which raised its estimates and repeated its "outperform" on the stock, and by hopes the brewer could land a big deal in Mexico.

Mexican brewer and bottler FEMSA said on Thursday it is in talks with several companies about a possible deal involving its beer business.

A source familiar with the situation told Reuters that FEMSA had talked with SABMiller and Heineken from the Netherlands about a possible sale of beer operations that could be worth billions of dollars.

Fund manager Schroders also saw good demand, adding 0.5 percent after an upgrade to "buy" from "neutral" by UBS in a sector review.

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Interdealer broker Icap added 0.7 percent as positive broker comment rolled in following Thursday's trading update, with Singer Capital upping its rating to "buy".

Economic data from the UK painted a mixed picture on Friday

British construction activity contracted at a faster pace in September than in August, with the Chartered Institute of Purchasing and Supply/Markit construction PMI index falling to 46.7 in September from 47.7 in August.

Meanwhile, British house prices rose for a fifth straight month in September and was flat year-on-year, the Nationwide Building Society said. The FTSE 100 index has made a wobbly start to the fourth quarter of the year, losing over 3 percent in three sessions, after having recorded its best gains since the index's inception in 1984 in the three months to September, up nearly 21 percent. (Editing by Rupert Winchester)

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