Britain's FTSE led down from eight-month high by bank fall

Mon Jan 20, 2014 4:04am EST

* FTSE 100 down 0.1 percent, near May 2013 high

* Barclays leads banks down after Deutsch Bank report

* Miners hit by slowing China growth

* Market just 0.3 percent off 13 year high

By Alistair Smout

LONDON, Jan 20 (Reuters) - Britain's top share index edged down from eight-month highs on Monday, pinned back by a fall in the banking sector after German lender Deutsche Bank reported a surprise loss.

Barclays fell 1.6 percent in early trade, the top faller on the FTSE 100, after Deutsche Bank posted a pre-tax loss of 1.15 billion euros ($1.6 billion) for the fourth quarter, itself dropping 5.1 percent.

Barclays is the closest peer among UK-listed banks to Deutsche Bank, as it is also driven by investment bank trading in fixed income, currencies and commodities (FICC).

"Barclays bank has had a fantastic run in the last couple of weeks... and on the back of Deutsche Bank's unexpected report, they're moving lower," Manoj Ladwa, head of trading at TJM Partners, said, adding that Barclays was most exposed to poor trading for Deutsche Bank.

"It doesn't bode well for banking stocks."

Barclays had been up 15 percent since mid-December before Monday's falls. While Nomura said that FICC-driven banks like Barclays would be hurt by the news, it added that the greater possibility of balance sheet reductions in Barclays should limit losses in the UK-listed bank.

The FTSE 100 was down 3.40 points, or 0.1 percent, at 6,825.90 by 0835 GMT, with financials, including banks, asset managers and insurers, taking 8 points off the index, which was offset by gains elsewhere.

Miners also weighed on the index after China reported slowing economic growth in the last quarter of 2013, hitting the price of copper.

The mining sector fell 0.6 percent, having posted its best week in 18 months last week.

The falls took the FTSE 100 down from an eight-month closing high posted at the end of last week, just 0.3 percent off a 13-year closing high posted in May.

Some traders were confident in the prospects for the market and its ability to break through the 2013 high, expecting a generally reassuring earnings season despite Monday's high profile miss from Deutsche Bank.

Of the 14 percent of companies to report yearly earnings so far this reporting season, 86 percent have beaten or met expectations on the FTSE 100, compared to just 67 percent on the pan-European STOXX Europe 600.

"We maintain the markets will continue to push higher through January... on strong corporate earnings led by double digit earnings growth," Atif Latif, director of trading at Guardian Stockbrokers, said.

"Equities still remain in an uptrend and we have continued to maintain our bullish bias."