UK stocks led lower by Wolseley and ENRC as Cyprus weighs

Tue Mar 26, 2013 5:35am EDT

* ENRC and Kazakhmys slump on Kazakhmys' ENRC impairment

* Wolseley falls after posting H1 profit drop

* Worries over Cyprus deal weigh on sentiment

By Sudip Kar-Gupta

LONDON, March 26 (Reuters) - Worries over Cyprus's bailout weighed on Britain's benchmark share index on Tuesday, while drops at miner ENRC and plumbing supplies group Wolseley also pegged back the market.

The blue-chip FTSE 100 index was flat at 6,380.46 points in choppy trade, slightly recovering from a 0.2 percent fall on Monday.

Central Markets chief strategist Richard Perry said that while uncertainty over the Cyprus bailout remained, the FTSE would be increasingly at risk of a more prolonged sell-off.

The FTSE remains up by 8 percent since the start of 2013, as global equity markets have been supported by world central banks' pledges of liquidity to fight the effects of the euro zone debt crisis and the uncertain economic outlook.

Perry said he would keep a long-term bullish view on the index provided that any falls caused by the Cyprus situation did not push the index below last month's lows of around 6,210 points.

"Technically, it's still hanging onto a positive outlook. The uptrend remains broadly intact, so the recent pull-back may still turn out to be just a consolidation. But if it falls below that February support level, I would start to get more worried," he said.

FALLS AT WOLSELEY AND ENRC

Miner ENRC slumped 5.5 percent while rival Kazakhmys also dropped 10.4 percent, after Kazakhmys said it had taken a $2.22 billion impairment on the value of its stake in ENRC.

Wolseley provided another drag on the FTSE 100, falling 1.6 percent after a 20 percent drop in interim pre-tax profits, with earnings hurt by the weak European economy.

"Wolseley would have benefited from earlier action to stem the pain in Europe," said Mirabaud Securities equity research partner Steve Clayton.

Lingering worries over the Cyprus deal also hit major UK banking stocks, which risk being exposed if any fall-out from Cyprus impacts other European banks, with Lloyds and Barclays falling between 1.4 and 1.5 percent.

The tough terms of the Cyprus deal, which has seen Cyprus agree to close its second-largest bank and inflict heavy losses on big depositors, has raised worries over future euro zone rescue deals.

"The peripheral European banking system is still fragile and there is a chance that further bailouts may be necessary," Espirito Santo wrote in a research note. (Reporting by Sudip Kar-Gupta; Editing by Catherine Evans)