* FTSE 100 sheds 0.5 percent; up 6 percent for 2012
* Banks, commods lead retreat on U.S. budget concerns
* U.S. Senate set to resume discussions at 1600 GMT
By Jon Hopkins
LONDON, Dec 31 Weakness in risk-sensitive banks,
miners, and energy stocks pulled Britain's leading shares lower
on Monday, the final trading session of 2012, with the outlook
for 2013 soured by stalled U.S. budget talks.
The FTSE 100 closed down 27.56 points, or 0.5
percent, at 5,897.81 after a thinly-traded half-day session
which ended at 1230 GMT. Volumes were less than 15 percent of
the 90-day daily average.
In spite of the dull finish to the month, the UK blue chip
index still added 0.5 percent in December, closing out the year
with a seventh straight month of gains, the longest monthly
winning streak since February 2005.
However, financial markets face kicking off 2013 without a
deal to avert a U.S. "fiscal cliff" of year-end austerity
measures and tax hikes as lawmakers in Washington struggle to
reach an agreement, with significant differences still between
the two sides. The U.S. Senate will convene at 1600 GMT to
continue eleventh-hour discussions.
"Traditional end-of-year volatility (low volumes making
bigger price swings) has been given a helping hand this year
with stubborn stateside politicians appearing to forget that the
2012 election is over and the fate of the nation's economic
growth is in their hands," Mike van Dulken, Head of Research at
Accendo Markets said.
Overall the UK benchmark index added nearly 6 percent this
year, helped by gains in banking shares, but it has lagged its
main European peers - with Germany's Dax up almost 30
percent and France's CAC ahead 15 percent - as
heavyweight mining shares struggled in the first half.
Miners lost around 30 percent peak-to-trough in
2012, but have recovered about 20 percent since June.
Tobacco stocks, which tend to be in demand even in harsh
economic times, were among the stocks which found favour on
Monday, with Imperial Tobacco and British American
Tobacco, up 0.4 percent and 0.3 percent respectively.
And U.S. stock index futures pointed to a
slightly higher open for Wall Street on Monday, looking to
rebound after sharp falls on Friday to snap a five-session
losing streak, as the talking continues in Washington.
While hope has largely evaporated for any sort of broad
fiscal deal, the lack of panic on U.S. markets shows that
investors still expect officials to find a solution to the
budget problems early in the New Year. The measures that kick in
on January 1 will also only have a gradual impact.
Technical analysts were also hopeful for further gains for
the FTSE 100 index in 2013.
"A 2012 resistance line suggests a target as high as 6,300,
and therefore a likely range for the UK index no worse than
5,700 - 6,300 for 2013," Zak Mir, Senior Analyst, Institute of
Trading and Portfolio Management said.
"In fact, with a UK negative watch AAA credit rating, triple
dip recession, a Canadian Bank of England Governor and even the
unravelling of the Coalition government apparently factored in
to the market, sideways trading appears to be the worst case
scenario," Mir said.
(Additional reporting by Tricia Wright and Alistair Smout;
editing by Ron Askew)