Weak company updates drag down FTSE 100 index

Wed Mar 5, 2014 12:00pm EST

* FTSE 100 index closes 0.7 percent lower

* Melrose, Legal & General down after updates

* Standard Chartered falls after results

By Atul Prakash

LONDON, March 5 (Reuters) - Britain's top share index fell again on Wednesday after rebounding from two-week lows in the previous session, with updates from some companies disappointing investors and tensions over Ukraine weighing on sentiment.

Engineering turnaround specialist Melrose fell 7.8 percent, the top decliner on the FTSE 100 index, after warning of challenging market conditions and saying sales growth in 2014 would not be easy to achieve.

Legal & General, a provider of life insurance and pensions, fell 1.9 percent, with analysts flagging a small miss in operational profit, while Standard Chartered dropped 2.1 percent after reporting its first drop in annual profits for a decade and saying its profits will remain "challenged" in the first half.

"Some large-cap companies have been particularly hit today, with Standard Chartered coming under pressure," James Butterfill, global equity strategist at Coutts, said.

"There has been some easing in tension, but the crisis in Ukraine is far from resolved and could easily deteriorate, if the situation is not handled sensitively."

French President Francois Hollande hosted a meeting of the U.S., Russian, British, French and German foreign ministers on Wednesday to discuss the Ukraine crisis.

The West and Russia, which said it could not order "self-defence" forces in Crimea back to their bases, are facing the most serious confrontation since the end of the Cold War over influence in Ukraine, a major commodities exporter and strategic link between East and West.

The FTSE 100 closed down 0.7 percent at 6,775.42 points after rebounding 1.7 percent in the previous session following a fall of 1.5 percent on Monday on Ukraine tensions.

"The FTSE 100 has been losing its momentum since the beginning of the year due to disappointing results from industrials such as BAE Systems, Rolls Royce and Melrose," Mike Jarman, chief market strategist at H2O Markets, said.

Analysts advised caution but said the market's medium- to longer-term outlook remained positive and the FTSE 100 index was poised to set a record high in the coming months.

"The situation in Ukraine remains a threat for the broader market. But generally people will continue to look towards central banks and economic data, which have been quite supportive," IG analyst Chris Beauchamp said.

"Once you have these temporary weaknesses out of the way, we could push higher from here."

The index was also weighed down by five stocks, including miners BHP Billiton and Rio Tinto, going ex-dividend. They took 8.46 points off the index, according to Reuters calculations.

However, losses were limited by gains in shares of some companies. British motor insurer Admiral Group rose 7.5 percent to the top of the FTSE 100 after posting higher than expected pre-tax earnings growth of 7 percent for 2013, boosted by new overseas business.