FTSE posts biggest loss in nearly a month

LONDON Tue Oct 23, 2012 5:12pm BST

The London Stock Exchange is seen during ther morning rush hour in the City of London April 11, 2011. REUTERS/Toby Melville

The London Stock Exchange is seen during ther morning rush hour in the City of London April 11, 2011.

Credit: Reuters/Toby Melville

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LONDON (Reuters) - The FTSE 100 fell for a third session on Tuesday, weighed down by concerns over weak earnings and the euro zone crisis after a failed attempt last week to break through technical resistance levels.

The blue-chip FTSE 100 posted its biggest one-day drop in nearly a month, bringing the index to its lowest levels in a week and wiping out last week's 1.8 percent rise.

A profit warning from Mulberrry on Tuesday added to the string of disappointing earnings from across the globe, while Moody's downgrade of five Spanish regions, including Catalonia, also depressed sentiment.

"We suddenly had some poor earnings, a few little mentions of Europe, and I think there's been enough of a reason to take your profits," Ed Woolfitt, head of trading at Galvan, said.

The FTSE 100 closed down 85 points, or 1.44 percent, at 5,797.91 at the close at 1530 GMT

Copper miner Kazakhmys was the biggest faller, losing 4.6 percent as the mining sector shaved 13 points off the index. Trading updates from heavyweight miners pose particular concerns given the slowing growth in top metals consumer China and the recent retreat in copper prices, which hit six-week lows on Tuesday.

Copper miner Antofagasta fell 3.4 percent. Both Antofagasta and Kazakhmys are due to give trading updates by the end of the month.

"The higher beta stocks have taken the heavier drop, but it's pretty broad across the board," Woolfitt said.

All but three stocks in the index posted losses on the session.

Burberry was a top faller, down 3.2 percent, after rival luxury brand Mulberry became the latest in the sector to issue a profit warning. Burberry itself warned on profit last month, though sales since have been slightly better.

AIM-listed Mulberry dropped 23 percent after blaming lower wholesale revenue in part on more challenging conditions in Asia.

DOUBLE-TOP SELL SIGNAL

The sell-off in the past three sessions follows a failed attempt to break out of the recent range of 5,933 to 5,751 points held since September 6.

Woolfitt said the upside break now looked less likely in the near term.

"It would need some fantastic news to force a break out in this market, and that news is not there. And a lot of people studying the technicals will see the same thing, so these things can be self-fulfilling prophecies," he said.

However, for the technicals picture to turn convincingly negative, the index would need to breach the low between the two near identical highs set in mid-September and mid-October, said Clive Lambert, technical analyst at FuturesTechs.

"From a technical point of view, you get a firm sell signal if it breaks 5,738, which is still a while away," he said, describing it as a "classic double-top sell signal".

"So there's elements today which look a bit scary, but there's other elements where you think there's not too much to worry about."

(Reporting by Alistair Smout; Editing by Ruth Pitchford)

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