China GDP, euro zone jitters take toll on FTSE

Tue Oct 18, 2011 4:35am EDT

* FTSE 100 down 1 pct

* Miners hit by demand concerns after China GDP

* Banks drop on Moody's France warning

By Tricia Wright

LONDON, Oct 18 (Reuters) - Britain's top shares fell on Tuesday, pressured by miners after Chinese data raised fears about demand for the world's top metals consumer, while revived concerns over the euro zone debt crisis unleashed further volatility.

Miners bore the brunt of the sell-off, tracking metals prices lower, after China's growth slowed in the third quarter to its weakest pace since early 2009.

Xstrata was among the worst off, down 4.8 percent, after the global miner issued a third-quarter production report showing copper output down 4 percent on the same period a year ago, while in line with the second quarter.

"The market is suddenly very nervous again," said Lex van Dam, hedge fund manager at Hampstead Capital, which manages $500 million of assets. "The iron spot price is the big worry right now, which is indicating a hard landing in China, something that could unravel the whole global economy."

Wolfgang Schaeuble, Germany's finance minister, helped spur a turnaround in market sentiment when he played down heightened expectations that European governments will resolve the region's sovereign debt crisis at an EU summit on Oct. 23.

Banks , particularly sensitive to the vagaries of the euro zone debt story, fell sharply, also knocked after Moody's late on Monday warned it may slap a negative outlook on France's AAA credit rating in the next three months.

Standard Chartered led the sector lower, down 4.2 percent, with traders citing the impact of Temasek Financial launching a S$650 million ($512 million) bond exchangeable into shares of the London-listed bank.

The FTSE 100 was down 54.61 points or 1 percent at 5,382.09 by 0818 GMT, with Monday's 0.5 percent dip putting it back below the technically important levels around 5,450 which it breached for the first time in 10 weeks on Friday.

"I think (market volatility) is here with us to stay at the moment until we've got some clear and ... concrete proof that there is a method of resolving the European crisis," Martin Dobson, head of trading at Westhouse Securities, said.

Atif Latif, director of equities and derivatives at Guardian Stockbrokers, noted an increase in "put" protection -- options to hedge against downside risk -- looking to take advantage of a FTSE 100 fall down to around 5,000-5,100.

Whitbread managed to outperform the weaker market, off only 0.4 percent, as Britain's biggest hotel and coffee shop operator reported a higher-than-expected first-half pretax profit and hiked its dividend by over 50 percent.

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