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Arab conflict, Europe debt worries dent FTSE

Published 03/09/2011, 04:15 AM
Updated 03/09/2011, 04:16 AM

* FTSE 100 falls 0.5 percent

* Energy stocks weaker fall as crude price falls

* Prudential gains after profits soar

By Simon Falush

LONDON, March 9 (Reuters) - Britain's top shares fell early on Wednesday, as turmoil across the Arab world and concern about Europe's sovereign debt prompted investors to decrease holdings in riskier assets like equities.

A fall in the price of crude, whose steep rise has prompted concern about global growth, helped to prevent a more significant sell-off and helped lift International Consolidated Airline Group 2 percent.

By 0855 GMT, the FTSE 100 index was down 29.11 points or 0.5 percent at 5,945.65, after holding steady the previous session.

Energy stocks were the biggest drag on the index as Brent crude dropped for a third day, dipping below $113 after reassurances from OPEC members of ample spare capacity eased anxiety about production losses from Libya.

Crude is still up around 20 percent this year and investors said this is making investors reluctant to buy into the equity market despite strong corporate profits and some strong economic data from the United States and Germany.

"It feels as if the market wants to go up, but it can't get the pluck to do so because of the price of oil and the impact that might have on the economy," said Andrew Bell, chief executive of the 1.1 billion pound ($1.8 billion) Witan Investment Trust.

Ex-dividend factors also weighed, with BHP Billiton, British American Tobacco, Hammerson, Serco, Shire and Standard Chartered all losing their payout attractions, taking 11.69 points off the index.

Banks sagged as investor concerns resurfaced about the euro zone sovereign debt crisis after Spain paid a premium to sell new debt via syndication in the previous session and Moody's downgraded Greece's credit rating on Monday.

ROLLS, PRU HIGHER

Rolls Royce was a strong riser, gaining 2.8 percent as the engineer announced the creation of a joint venture with Daimler and offered a takeover offer for industrial diesel engine maker Tognum at 24 euros per share.

A source said the offer price had not been agreed by Tognum. Analysts said the acquisition would be one that makes sense for Rolls-Royce.

Britain's largest insurer Prudential rose 3.9 percent, the top blue chip gainer, after it beat forecasts with a 24 percent increase in its 2010 profit, helped by continued strong growth in Asia, and hiked its dividend by a fifth.

Trade looks set to remain rangebound, technical analysts said.

"Unless the FTSE takes out either extreme at 6,105.77 or 5,860.95, traders should continue to look for choppy, two-sided markets," James Hyerczyk, an analyst at Autochartist, said.

"The current chart pattern suggests that investors are nervous enough to lighten up their positions on rallies, but attracted to value on the breaks."

Investors will watch UK trade figures for January at 0930 GMT for more evidence on whether the domestic economy is moving into full recovery mode.

German January industrial production data, due at 1100 GMT, will also come under investor scrutiny.

Across the Atlantic, U.S. January wholesale inventories data are due at 1500 GMT. (Editing by David Holmes) ($1=.6194 Pound)

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