Miners, Vodafone drag down Britain's FTSE index

Wed Apr 3, 2013 8:22am EDT

* FTSE 100 index falls 0.5 percent

* Mining stocks hurt by metals demand concerns

* Vodafone drops on Verizon's bid denial

* Chartists remain positive, support seen at 6,350

By Atul Prakash

LONDON, April 3 (Reuters) - Britain's top share index retreated on Wednesday, pulled down by worries about the global economy which hit mining stocks and by a drop in Vodafone after Verizon denied making a bid.

Miners tracked a drop in metals prices, with copper falling to an eight-month low, after weak manufacturing data from the United States and Europe this week.

The UK mining index fell 1.8 percent to feature among the top decliners, with ENRC, BHP Billiton and Xstrata falling by between 2.4 to 6 percent.

Miners were also pressured by a target price cut by Credit Suisse.

"Our view is that with Western central banks in supportive mode, any pull-back will prove temporary and likely bought into by investors still seeking the returns clearly absent from other traditional savings-based products," said Jeremy Batstone-Carr, head of private client research at Charles Stanley.

At 1138 GMT, the blue-chip FTSE 100 index was down 31.11 points, or 0.5 percent, at 6,459.56, after gaining in the last two sessions.

Heavyweight Vodafone took the most points off the index after its joint venture partner Verizon Communications sought to end to rampant bid speculation by saying it did not plan to buy the British group.

Vodafone shares fell 2 percent. However, analysts remained positive on the stock.

"Holders shouldn't be too concerned at the lack of deal talks confirmation," Mike van Dulken, head of research at Accendo Markets, said.

"If anything, intensification of recent market talk just serves to highlight, potentially even increase, the perceived value of the U.S. wireless joint venture. Given this represents Vodafone's most valuable asset ... this likely underpins the UK giant's share price in the near term."

The potential sale of the $115 billion stake has driven Vodafone shares up about 25 percent since the start of the year.

"The turnaround in Vodafone has clearly not helped the market, with rising tensions in Korea also providing some investors with reasons to take profits," Keith Bowman, equity analyst at Hargreaves Lansdown, said.

"For now, defensive yield-generating sectors still remain in focus, although other selective cyclical sectors such as airlines continue to attract attention."

CHARTS POSITIVE

Technical analysts remained positive on the index's outlook as it recently rallied from the uptrend line drawn from its November lows.

"The market is still in an uptrend and we just have to stay with it," said Dominic Hawker, technical analyst at Westhouse Securities. "Even if the index breaks its immediate support of 6,350 and falls to 6,100, we would still be in the medium-term uptrend," he said, adding the index would face strong resistance at its 2007 peak of 6,750.

Among sharp gainers, diversified miner Vedanta Resources advanced 4.3 percent after India's top court reversed an earlier order by a court to close its Tuticorin smelter. (Reporting by Atul Prakash; Editing by Ruth Pitchford)