SAB and GKN knock UK's FTSE 100 off 7-week highs

Thu Jul 25, 2013 12:04pm EDT

* FTSE 100 closes down 0.5 pct at 6,587.95 points

* GKN worst FTSE stock, hit by rumours of bid for peer

* SAB falls and drags down rival Diageo

* UK GDP growth fails to boost stock market

By Sudip Kar-Gupta

LONDON, July 25 (Reuters) - A fall in drinks group SAB and engineer GKN knocked Britain's main equity index off seven-week highs on Thursday, with some traders expecting the market's recent rally to stall in the near term.

The blue-chip FTSE 100 index closed down by 0.5 percent, or 32.48 points, at 6,587.95 points - marking a retreat from seven-week highs reached earlier this week.

SAB fell 2.5 percent after posting lower sales, dragging down rival Diageo by 1.8 percent with both companies taking the most points off the FTSE.

GKN also fell 4.2 percent to make it the worst-performing FTSE stock after its shares were hit by speculation of a GKN bid for U.S. group Spirit AeroSystems . GKN declined to comment on the rumours.

The FTSE 100 has risen nearly 10 percent from lows of around 6,000 points reached in June, but some signs of weak corporate results this month have stalled that rally.

EGR Broking managing director Kyri Kangellaris said he would not buy shares at these levels due to the risk of further weakness in the market over the next month.

"I would not be buying up around here," he said.

Kangellaris backed selling shares in UK banks Barclays and Lloyds, telecoms group Vodafone and oil major BP before buying back into them at lower prices later on.

Logic Investments' trading director Darren Easton said he would buy small positions on the FTSE at the 6,550-6,560 level and hold them up to 6,600 points before selling for a profit.

Data showing UK economic growth of 0.6 percent in the second quarter also failed to lift the market, with equity traders saying that while the growth was welcome, it was not strong enough to push up the FTSE 100.

"The economy is on a stronger footing but there are still numerous challenges, not least from stubbornly high inflation and static or negative wage growth, both of which will inhibit spending," said MB Capital trading director Marcus Bullus.

The FTSE hit a 13-year high of 6,875.62 points in late May.

It then eased back in June due to expectations that the U.S. Federal Reserve will gradually scale back economic stimulus measures that had driven a global equity rally, although the FTSE remains up around 12 percent since the start of 2013. (Additional reporting by David Brett and Toni Vorobyova; Editing by Catherine Evans)

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