FTSE hits near 10-month closing low; miners weigh

Tue Jun 29, 2010 12:44pm EDT

* FTSE 100 down 3.1 pct

* Banks, commodity stocks among heaviest fallers

* Debt worries, growth fears revive risk aversion

By Tricia Wright

LONDON, June 29 (Reuters) - Britain's top share index hit a near 10-month closing low on Tuesday, led down by mining stocks and banks, as risk appetite was hurt by renewed concerns over the strength of global recovery and Europe's debt problems.

The FTSE 100 .FTSE closed down 157.46 points, or 3.1 percent, at 4,914.22, its lowest close since Sept. 4, 2009, and its biggest one-day percentage fall since May 14, 2010.

There was not a single FTSE 100 riser.

Miners dominated the blue chip fallers' list, pressured by weak base metal prices, and with traders pointing to fears about potential soft growth in the Chinese economy. Rio Tinto (RIO.L) and Xstrata (XTA.L) were the worst off, down 6.4 percent and 6.1 percent respectively.

A leading indicator for the Chinese economy was revised to show a much smaller rise than previously published, and was cited by some traders as having an impact, even though the data is not usually closely watched. [ID:nN29126233]

"Today is a Chinese story, and we've also had some very, very weak consumer confidence figures from the U.S. It doesn't bode well for the non-farm payrolls on Friday," said Angus Campbell, head of sales at Capital Spreads.

U.S. consumer confidence dropped sharply in June after rising for three months on worries about the labor market, according to a report from the Conference Board. [ID:nN29138077]

And jitters mounted ahead of bank repayments to the European Central Bank this week. Banks must repay 442 billion euros ($546 billion) to the European Central Bank on Thursday, leaving a potential liquidity shortfall in the financial system of over 100 billion. [ID:nLDE65R0LE]

These concerns over governments' moves to try and solve the debt problems by cutting government spending, boosted the dollar and added to the pressure on metals prices ahead of what are expected to be weak U.S. non-farm payrolls at the end of the week. [USD/]

Banks were lower as concerns about debt exposure returned. Barclays (BARC.L) shed 6.3 percent, while sector heavyweight HSBC (HSBA.L) fell 3.7 percent.

Energy stocks were a big drag on the index as crude prices CLc1 fell below $76 per barrel.

Troubled oil major BP (BP.L) fell 1.7 percent, with Tropical Storm Alex close to hurricane strength in the Gulf of Mexico, where the company has been trying to plug the biggest U.S. oil spill ever, on Tuesday. [ID:nN29120831]

Technical analysts said the FTSE 100 could be on the verge of a big retreat.

"Note that 4,927 is 38 percent Fibonacci retracement support from March 2009 low to 2010 high, so a weekly close below here should really tip the balance and send the index plunging," said Nicole Elliott, technical analyst at Mizuho Corporate Bank.

Vodafone (VOD.L) fell 2.6 percent as Credit Suisse cut its rating to "neutral" from "underperform" with an unchanged 160 pence price target, citing recent outperformance by the mobile telecoms group's stock.

Support services group Serco (SRP.L) fell 3.3 percent, along with the market, despite saying it was on track for strong revenue growth in 2010, and predicting its future performance would benefit from client demand for efficiency during a state spending squeeze in Britain. [ID:nLDE65S057] (Editing by Sharon Lindores)

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