December 13, 2012 / 12:25 PM / 5 years ago

Britain's FTSE edges down as fiscal cliff returns to focus

4 Min Read

* FTSE 100 index loses 0.3 percent

* Commodity stocks ease down as Fed highlights fiscal worry

* AstraZeneca leads health care down after drug trial

* Banks gain on QE, euro zone banking union deal

By Alistair Smout

LONDON, Dec 13 (Reuters) - Britain's leading share index fell on Thursday as concerns over U.S. fiscal negotiations resurfaced, hitting commodity stocks and threatening to end the year's longest streak of gains.

Basic materials stocks took 3 points off the index as news of the U.S. Federal Reserve's new monetary stimulus measures were offset by concerns over the potential impact of austerity on the world's largest economy.

Copper weakened after Fed chairman Ben Bernanke warned that monetary policy won't be enough to offset damage if politicians fail to avert the "fiscal cliff" of steep tax hikes and budget cuts scheduled to kick in on Jan. 1.

The Fed announced more bond-buying on Wednesday and indicated interest rates would stay near zero until unemployment falls to 6.5 percent.

"What the Fed announced yesterday was more or less expected, so I think we've had people selling the news," Ioan Smith, strategist at Knight Capital, said, adding that many indexes had had their best runs in more than three years.

"I think a lot of people are closing up their books before the volume dries up, so it's not a surprise if some people have decided to take their profits and look to trade movements based on announcements on the fiscal cliff."

At 1136 GMT, the FTSE 100 index was down 14.78 points, or 0.3 percent, at 5,931.07, having closed 0.4 percent higher at a nine-month closing peak on Wednesday.

The FTSE 100 had posted six straight days of gains for the first time this year before the morning's losses.

Falls in drugmakers were also a sizeable drag on the FTSE 100, with the health care sector accounting for nearly half of the index's total decline.

AstraZeneca lost 2.5 percent, taking the most points off the index as it said an experimental rheumatoid arthritis drug proved inferior to Abbott Laboratories' Humira in a clinical study, knocking hopes for one of the few late-stage products in the company's pipeline.

Volume in AstraZeneca was above its 90-day daily average by midday and was the biggest on the index, while overall FTSE volume was at just 22 percent by that time.

"AstraZeneca have had a relatively good run, so I suspect people are using this as an opportunity to take profits," Savvas Neophytou, analyst at Panmure Gordon, said.

"It might not be specific to this particular clinical trial, but I'm sure it didn't help."

The top faller on the index was Wood Group, which lost 3.6 percent as it foresaw losses of around $20 million on a contract in Oman in the current year, although it added that it expects to deliver growth for the year in line with expectations.

Gains by banks provided some underlying support for the blue chip index, with financials adding the most points to the index.

The sector was boosted by the Fed's new bond-buying announcement, with some analysts also pointing to euro zone finance ministers' agreement overnight of a deal on a banking union.

"This potentially clears another hurdle in this financial turned sovereign debt crisis and sees the UK maintain safeguards," said Mike van Dulken, head of research at Accendo Markets. (Additional reporting by Jon Hopkins; Editing by Hugh Lawson)

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