Weak earnings weigh on FTSE as investors focus on ECB
LONDON (Reuters) - Britain's FTSE edged lower on Tuesday halting a three-day winning streak, as investors awaited central bank meetings later in the week which could bring policy action, while poor results by BP and banks outweighed a strong performance by miners.
At 1045 GMT the FTSE 100 was down 21.09 points, or 0.4 percent, at 5,672.54.
Volume was once again weak, at less than one fifth of its 90-day daily average, with many investors keeping to the sidelines ahead of policy announcements from the European Central Bank and the U.S. Federal Reserve.
ECB President Mario Draghi's pledge last week to do whatever it takes to protect the euro has fuelled expectations the bank will resume buying bonds to ease soaring Spanish and Italian borrowing costs, but such a step is far from certain.
"The market really is in 'wait and see' mode," said Chris Beauchamp, a market analyst at IG Index. "Expectations have been running so high and there is a tinge of nervousness coming in now."
Markets have rallied since Draghi's comments but demand for risk assets seemed to run out of steam early on Tuesday, leaving the FTSE 100 vulnerable to weak earnings reports.
Oil company BP Plc (BP.L), down 4.4 percent, was the biggest drag on the index after it took a $5 billion charge in the second quarter - more than a typical three months' worth of profits.
The company is struggling under the weight of litigation over the 2010 U.S. Gulf oil spill and a row with its Russian partners.
The British heavyweight took about 14 points off the FTSE, while trading in high volume of over 85 percent of its 90-day daily average, more than four times that of the index.
"BP is clearly a big weight on the market considering that the euro zone is up today. The lack of volume really amplifies the swings of the market," said Brewin Dolphin Securities chief strategist Mike Lenhoff.
Banks .FTNMX8350, down 1.5 percent, were the worst performing sector, taking a combined 8.8 points off the FTSE and halting a four-session rally spurred by hopes of fresh central bank policy action. Poor results from European peers UBS (UBSN.VX) and BBVA (BBVA.MC) helped cap momentum in the sector.
Miners .FTNMX1770 were the index's best performers, adding 4.5 points on a batch of positive reports.
India-focused Vedanta (VED.L), up 4.4 percent, led FTSE 100 gainers after it posted a 27 percent rise in first-quarter core earnings, as strong growth in power sales offset the impact of lower metal prices and zinc volumes.
Global miner Xstrata XTA.L shares rose 1.6 percent, after the miner said it would boost copper production in Australia by 140,000 tonnes over the next five years from a new mine, which will also yield more than a half-million tonnes of iron ore.
Russian precious metals miner Polymetal (POLYP.L) was up 0.9 percent after it posted a 19 percent year-on-year rise in revenue, at $376 million for the second quarter revenue, boosted by strong gold and silver production.
(Reporting by Viktoria Dendrinou; Editing by Catherine Evans)
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