March 11, 2011 / 12:57 PM / 6 years ago

FTSE falls on Japan quake

4 Min Read

LONDON (Reuters) - Britain's top share index headed for its biggest weekly fall since July on Friday, testing support levels around 5,800, after a huge earthquake in Japan knocked already shaky sentiment.

By 1222 GMT (7:22 a.m. EST), the FTSE 100 .FTSE was down 26.18 points or 0.5 percent at 5,819.11. The index was down over 2.5 percent on the week, setting a fresh intraday low for the year of 5,796.44.

"It feels to me like a steady correction toward the low end of a trading range rather than something that looks anymore uncomfortable than that," Paul Kavanagh a partner at Killik & Co, said.

"Sentiment has taken around 200 points off the FTSE, without trying to sound too complacent, the 200-point drop demonstrates there is underlying resilience to it."

Investor confidence has been tested by euro zone debt concerns, spreading political unrest in the Middle East and North Africa and worries about the Chinese and the United States economies.

London's blue chips hung around the 50 percent Fibonacci retracement level of 5,812, from the November 30 low to the late February high.

Life insurers .SXIP such as Prudential (PRU.L), Aviva (AV.L) and Standard Life (SL.L) fell 1.0 to 1.7 percent after an 8.9 magnitude earthquake hit the northeast coast of Japan triggering a 10-meter tsunami.

Analysts said Lloyds of London LOL.UL insurers such as Catlin CGL.L, down 4.5 percent, could be affected by the disaster.

"At the moment this is just a kneejerk reaction within the sector ... then people start focusing on exactly where the exposures lie," Joshua Raymond, market analyst at City Index, said.

Oil Slide

Integrated oils .FTNMX0530 were the sharpest fallers as investors monitored events in the Middle East and North Africa.

Troops loyal to Libyan leader Muammar Gaddafi battled to retake the oil port of Ras Lanuf on Friday.

The threat of unrest spreading to other oil-producing nations in the region such as Saudi Arabia remains, which could disrupt oil supplies.

Banks .FTNMX8350, which were lower on Thursday after Moody's cut Spain's credit rating, fell further ahead of a summit of European ministers.

Inflation worries persisted in the UK as factory gate inflation rose to its highest annual rate in more than two years in February.

Killik's & Co's Kavanagh said the UK retail sector is already showing signs of deterioration in the face of higher inflation and interest rises on the horizon.

Home Retail HOME.L, down 1.2 percent, delivered a profit warning and grim forecast for 2011-12 on Thursday, raising fears of a major downturn in consumer spending.

"Once interest rates begin to rise you can almost kiss the sector goodbye," Kavanagh said.

On the upside, ARM Holdings ARM.L gained 1.9 percent, as RBS reiterated its "buy" rating on the stock, saying oversupply issues, which had caused some concern and pressured the shares, won't be a serious long-term problem.

U.S. stock index futures pointed to a lower open on Wall Street with U.S. February retail sales figures, March preliminary Reuters/University of Michigan consumer sentiment survey and U.S. January business inventories due for release.

Editing by Erica Billingham

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