Downbeat earnings and data drag Britain's FTSE off highs

Thu Jan 31, 2013 7:24am EST

* FTSE 100 down 0.6 percent

* Royal Dutch, AstraZeneca updates disappoint

* RBS knocked as FSA opens door to swaps compensation

* Aggreko haunted by earnings worries

* BSkyB cheered by online sports coverage offer

By David Brett

LONDON, Jan 31 (Reuters) - Britain's top shares came off multi-year highs on Thursday as a mixture of downbeat earnings and macro economic data kept the bulls at bay ahead of important jobs data and corporate results in the U.S.

By 1206 GMT, London's blue chip index was down 36.20 points, or 0.6 percent to 6,286.91, slipping away from highs hit in mid-May 2008.

Following Italian oil service firm Saipem's shock profit warning the previous session, which had a ripple effect across the European equity markets, Royal Dutch Shell alone took around 8 points off the UK blue chip index on Thursday after the oil major's fourth quarter profit came in nearly $400 million short of expectations

AstraZeneca fell 5.6 percent in heavy volume having traded 180 percent of its 90-day daily average by 1206 GMT, after the drugmaker warned the coming year will be tough.

Antofagasta toiled too, shedding 0.6 percent and extending falls in the previous session when doubts were raised over its earning outlook.

Sentiment was also hurt ahead of non-farm payroll data due out on Friday by concerns about the U.S. economy a key market for Britain's heavyweight exporters -- after data showed an unexpected contraction in fourth quarter gross domestic product and the U.S. Federal Reserve acknowledged that economic activity had stalled.

"I think there's a general perception that equities were overdue a pull back after the recent run, and with U.S. GDP coming in with such a disappointing measure, it was going to take big beats on earnings for the FTSE to push higher this morning," Matt Basi, head sales trader at CMC Markets, said.

Recent results have put a dampener on the optimism among investors, which had helped push the markets up towards four-and-a-half year highs.

While 70 percent of European companies have so far beaten or met earnings estimates in the current reporting season, top analysts still expect fourth-quarter growth to fall 8.8 percent year-on-year.

Analysts also forecast a 1.7 percent contraction in fourth-quarter earnings in the U.S.

"It will be interesting to see how Mastercard and others come in later. U.S. earnings have been a huge part of the push higher since the turn of the year, so bulls will be looking for more big corporate numbers if we're going to carry on shrugging off the macro backdrop," CMC's Basi said.

DON'T BANK ON IT

There was more regulatory concerns shrouding the backdrop for the banks, with Royal Bank of Scotland slipping 2.5 percent after the UK's financial regulator opened the door to swaps compensation claims, which could cost UK banks millions.

The news came a day after Lloyds Banking Group combination of concerns over its role in an industry-wide probe into the alleged manipulation of Libor interest rates and broker downgrades.

Temporary power provider Aggreko also extended its falls over the last five trading days to more than 11 percent, with traders citing recent press speculation surrounding the potential for another warning on earnings when it reports in March as weighing on the stock.

"The price fall has made the price-to-earnings ratio (16.8 times) look cheap, but as short interest has risen 5 percent in the past week and there are 6.25 percent of free float shares on loan, it suggests a number of investors agree with the press speculation and that analysts should be sharpening their pencils for more cuts to estimates," a London-based trader said.

Investors greeted BSkyB's offer to show its popular sports channels online for a daily fee with enthusiasm, pushing the shares up 1.4 percent as the company seeks new customers to offset slowing growth at its core pay-TV service amid sluggish consumer spending.

Diageo was the top riser up 1.8 percent after the world's biggest spirits group ended talks to buy a stake in top-selling tequila brand Jose Cuervo.

(Written by David Brett/editing by Chris Pizzey, London MPG Desk, +44 (0)207 542-4441)

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