FTSE falls on Fed concerns, Severn Trent slips

Wed Jun 12, 2013 4:30am EDT

* FTSE 100 index falls 0.2 percent in choppy trade

* Severn Trent drops 7.8 percent as bidder walks away

* Vodafone down, makes takeover bid for Kabel Deutschland

By Atul Prakash

LONDON, June 12 (Reuters) - Britain's top share index fell on Wednesday on growing concerns the U.S Federal Reserve might start trimming its money printing programme, with Severn Trent dropping 9.7 percent after a bidder walked away.

The blue-chip FTSE 100 index fell for a third consecutive day to trade near the previous session's seven-week intra-day low. At 0816 GMT, the index was down 11.58 points, or 0.2 percent, at 6,328.50 points.

Recent encouraging economic data from the United States has raised concerns that the Fed could scale down its bond buying programme, which had helped the index to scale a 13-year high last month. It has fallen nearly 9 percent since the peak.

"Concerns that markets will slowly have to become accustomed to reduced stimulus, and in effect liquidity, continue to emanate. Near term, markets look set to remain highly volatile," Hargreaves Lansdown equity analyst Keith Bowman said.

"With the exact outcome of reduced stimulus and the outlook for global economic health still largely unknown, a strategy of diversity encompassing both defensive and cyclical arenas, for now, should be pursued."

The telecom sector was the top decliner, led lower by a 4.7 percent drop in Vodafone. The company, which traded without entitlements to its latest dividend payout, said it had made a preliminary takeover bid for Germany's biggest cable company, Kabel Deutschland Holding.

Utilities shares were hit by a 7.8 percent drop in Severn Trent after a Canadian-led consortium wooing the company walked away empty handed. The British water company had refused to engage in talks before a bid deadline expired.

However, the UK mining index climbed 0.6 percent, as copper and aluminium prices rebounded and gained 0.5 percent to 0.8 percent.

Mike van Dulken, head of research at Accendo Markets, said the FTSE 100 index could still fall towards 6,220.

"But it may ultimately prove (to be) a good thing in terms of clearing the froth from an overdone market, as well as giving short-term traders a second bite at the cherry should the index resume its recovery uptrend." (Editing by Catherine Evans)