FTSE down on mixed results, lingering credit woes

By Michael Taylor

LONDON, July 26 (Reuters) - The FTSE 100 .FTSE of Britain's leading shares dipped to a near three-month low on Thursday after a flurry of corporate results provided limited support as U.S. credit worries remained. Worries that a rise in defaults on U.S. subprime mortgage loans could spiral into a broader financial crunch have stalked markets since mid-June.

At 1054 GMT, the UK's leading index was 29.7 points, or 0.5 percent lower at 6,424.6.

On the downside, a 40 million pound ($82.39 million) bill for UK floods in June helped push Legal & General's (LGEN.L) general insurance business into an operating loss in the first half of the year.

L&G's non-life unit plunged to a 38 million pounds operating loss during the first six months of 2007, largely due to the impact of the June floods, which badly hit central and northern England. L&G shares shed 6.2 percent.

In other companies reporting, BT Group (BT.L) showed it has pulled further ahead in Britain's highly competitive broadband market as it met forecasts with a 3 percent increase in first-quarter core earnings and revenues.

But its shares fell 2.7 as analysts said there was little in the statement to excite a shaky market while some noted that its free cash flow figure was disappointing.

"There is some nervousness around that we don't truly understand the extent of the problems within the subprime market and whether it can be contained to that individual area or whether it'll start to contaminate the wider economy," said Henk Potts, a strategist at Barclays Stockbrokers.

Also in negative red, Intercontinental Hotels Group (IHG.L) shed 3.8 percent as traders cited a lack of new information on continued bid speculation that has boosted the share price in recent months and the turmoil that has hit the credit market within the last six weeks.

OIL OFFERS LIGHT RELIEF

Supporting sectors included oils after U.S. crude oil surged more than $1 to $77, its highest in almost a year, on increasing demand from refiners in the world's top consumer.

The rally lifted U.S. crude above London Brent for the first time since February, restoring its traditional premium. Analysts and investors pointed to U.S. data released on Wednesday that showed crude stocks fell for a third consecutive week [EIA/S].

Among heavyweight oil stocks, BG Group (BG.L) added 2.5 percent to top the FTSE 100 gainers, while BP (BP.L) gained 1.9 percent.

Royal Dutch Shell (RDSa.L) was up 2.2 percent after posting a 20 percent rise in second-quarter profits as fat refining margins helped outweigh lower output.

In pharmaceuticals, GlaxoSmithKline (GSK.L) tacked on 0.8 percent after Morgan Stanley raised its price target to 1,400 pence from 1,300 pence and despite a price target cut from ING.

Glaxo nearly tripled its share buyback programme to 12 billion pounds ($25 billion) on Wednesday, boosting its shares even as sliding sales of diabetes drug Avandia held back second-quarter profit.

AstraZeneca (AZN.L) also supported, gaining 0.8 percent after it nudged up its forecast for 2007 earnings after reporting a 17 percent rise in second-quarter adjusted earnings and announced a big increase in its cost-cutting programme.

"The corporate numbers have done their bit in terms of supporting the market by coming through with some robust numbers but the picture just looks so cloudy at the moment (with credit uncertainty)," said Barclays' Potts.

"The market is still concerned that we are going to see contamination coming through from the issues that have been raised in relation to subprime lending and whether that will filter through to weaker consumer confidence and spending."

Shares in home improvements retailer Kingfisher (KGF.L) climbed 0.2 percent on relief that a slowdown in second-quarter sales growth -- due largely to record-breaking wet weather in the UK -- was not worse.

British chemicals group ICI ICI.L tacked on 0.9 percent after JP Morgan increased its price target to 480 pence from 450 pence with a "underweight" rating.

Among midcaps, Carphone Warehouse (CPW.L), Europe's top independent retailer of mobile phone services, lost 5 percent after it unveiled a 19.9 percent rise in first-quarter cell phone connections and said it was on track to hit year forecasts.

"The results were slightly above overall expectations so I think the stock fall is just because the shares were up four percent yesterday because of a rumour Vodafone was going to buy them out," said one analyst, who declined to be named.

(Additional reporting by Dominic Lau, Ana Nicolaci da Costa and Rebekah Curtis)