Shares bruised by earnings concerns

LONDON (Reuters) - The FTSE 100 fell on Friday, dented by corporate earnings concerns after a second profit warning in a week from the engineering sector and by more weak data from mega metals consumer China.

Mid-cap Morgan Crucible, an advanced materials group, fuelled concerns about slowing growth in China, as it issued a profit warning and announced job cuts, blaming a slowdown in China and weak demand in Europe.

Its shares plunged 11 percent.

The profit warning, hot on the heels of one from fellow industrial materials maker Cookson Group, hit other engineering companies. Among the blue chips, GKN, IMI and Melrose each lost 2.4 to 3.3 percent.

Miners also felt the sting of the global economic slowdown, with Evraz temporarily shutting its Czech steel production line due to low demand.

The sector suffered target price downgrades, including from HSBC and Credit Suisse, the latter reflecting cuts in its expectations for metals prices.

The FTSE 100 closed down 30.14 points or 0.5 percent at 5,799.61 points, taking its losses for the week to 0.8 percent. The mid-cap FTSE 250 dipped 0.1 percent, led by Morgan Crucible and in four-and-a-half times its 90-day average daily volumes.

The profit warnings are "to be excepted given the economic backdrop is somewhat weak, particularly in Europe," said Edmund Shing, head of European equity strategy at Barclays.

"In general we do see headwinds for the market coming from the earnings season and the need to see further downgrades to consensus estimates, particularly for next year."

Chinese data on Friday offered more proof of the slowdown hitting the world's biggest metals consumer, with bank lending missing forecasts in September.

Stockmarkets could get a lift if weakening data prompts Chinese authorities to dole out more stimulus. But for now, market talk of impending measures has proved unfounded.

China has been an important growth market for UK companies at a time of spending cuts at home and in Europe. In a fresh blow for UK consumers, Centrica, the owner of Britain's biggest energy supplier, said it will increase domestic gas and electricity prices by 6 percent next month.

The tough market conditions - with third quarter earnings at Britain's large and mid-cap companies seen down on average by 7.4 percent year-on-year, according to Thomson Reuters Starmine - have increased the importance of stock picking.

On Friday Hargreaves Lansdown stood out. The investment manager topped the FTSE 100 gainers, up 3.6 percent after reporting record high assets and rising revenues.

Overall, though, concerns about earnings and the economic outlook - alongside the euro zone debt crisis - have helped keep the FTSE 100 in a tight range of around 200 points for the past four weeks after rallying 700 points since early June.

"I still believe that this is in a topping-out process and we will see some downside development in the near term," said Anders Soderberg, technical strategist at SEB.

"As long as you hold below the September peak, I'm more prone to be looking for the market to try and go lower and actually try to break lower."

On the upside, resistance in the 5,885 to 5,913 area should cap any gains early next week, while to the downside 5,738, the October 1 trough, will provide support, he said.

(Additional reporting by Alistair Smout; Editing by Susan Fenton)

Source: http://news.yahoo.com/ftse-slips-back-rally-071932804--finance.html

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