LONDON (Reuters) - The FTSE 100 slipped on Tuesday, hampered by profit taking on mining stocks ahead of economic data from China, and as the U.S. corporate earnings season came into focus.
Miners shed 0.7 percent as investors, gearing up for data out of top metals consumer China in the next two weeks, including fourth-quarter GDP, moved to lock in profits. The sector had rallied around 16 percent from a November trough.
Societe Generale, in a note, said it reckons a hard landing in China remains a real risk despite recent signs of economic improvement.
SocGen recommended playing this possibility by selling European miners, as well as the tech hardware and personal goods sectors - which also have high exposure to Asia - while buying into media and food retail stocks.
Investors were also wary as the fourth-quarter U.S. earnings season gets underway, with figures due from Alcoa, the largest U.S. aluminium producer, after the Wall Street close on Tuesday.
“There’s maybe just a little bit of fear coming in with regards to the reporting season which we are literally just starting on in America,” Alastair McCaig, market analyst at IG Index, said.
“With Alcoa being the aluminium producer it is, it does give a relatively decent barometer of how the land might lie for the likes of the automotives, aeronautical, manufacturers, housing ... and the miners.”
Anglo American bucked weakness in the sector as investors welcomed news that Australian mining executive Mark Cutifani had been appointed its chief executive.
Anglo shares, which have underperformed the sector by around 20 percent since the start of last year due to strikes, delays and cost overruns, added 1.4 percent on the news. Many analysts hope Cutifani’s appointment will herald a review of the group’s underperforming assets and a restructuring of its portfolio.
The FTSE 100 closed down 10.95 points, or 0.2 percent, at 6,053.63, extending declines from Monday when it fell for the first time this year.
However, this left the UK benchmark only a touch beneath Friday’s closing level, its highest in nearly two years, with the index having chalked up a 2.6 percent gain so far this year.
“It’s not a time to book profits given that long-term fundamentals still look incredibly attractive,” Henk Potts, market strategist at Barclays, said.
“Corporate profitability continues to grow, valuations look very cheap, and companies are awash with cash which results in higher dividends and share buybacks, and merger and acquisition activity - all of which create a pretty powerful mix of positivity for equity market investors for 2013.”
Market heavyweight Vodafone helped limit the index’s losses as its shares rose 1.7 percent to 162.74 pence.
Vodafone’s partner in its U.S. joint venture, Verizon Wireless, said it would be “feasible” to buy out the British firm’s stake in the business in what would be one of the biggest corporate deals ever.
Verizon Communications Chief Executive Lowell McAdam told the Wall Street Journal “we have always said we would love to own all of that asset”, which is 55 percent owned by Verizon Communications and 45 percent by Vodafone.
“There has been much negative news on VOD given the tough outlook for European telecoms ... due to the macro environment, but forward looking we see (it retesting) 191 pence,” Atif Latif, director of trading at Guardian Stockbrokers, said.
“Should (Verizon Communications) make a move on the 45 percent stake, we see value on a standalone basis, and with the shares offering a prospective yield of 7 percent coupled with the defensive nature of the company we see the current valuation as undemanding.”
Trading volume in Vodafone was robust, at 164 percent of its 90-day daily average, against the FTSE 100 index on 95 percent of its 90-day daily average.
Editing by Susan Fenton