LONDON Britain's leading shares fell on Monday after touching a 4-1/2 year high early in the session, with technical analysts noting the index could be set for a minor correction.
Energy stocks, among Friday's biggest gainers, were the main drag on blue-chip sentiment as Nomura warned that the sector was inexpensive for a reason and attractive price-to-earnings or dividend yields masked high break-even oil prices.
"If headline production continues to be used as a proxy for cash flow for European Big Oil, we see no positive inflection point during 1H 2013," Nomura said in a note.
At the close, the FTSE 100 was down 13.72 points, or 0.2 percent at 6,107.86, having gained more than 2 percent since the start of 2013.
"If the reversal levels manage to prevent a trend continuation then chances are we may be setting up for a correction to the downside," said Sandy Jadeja, Chief Technical Analyst at City Index.
"The all important 'trend' remains bullish and this should not be ignored as such. Given the recent bullish swings, the indices appear to be setting the stage for a minor correction."
Banks were also lower, seeing earlier gains reversed ahead of Q4 earnings this week from U.S. peers JPMorgan Chase and Goldman Sachs.
But Lloyds Banking Group rose 1.6 percent and added the most points to the FTSE 100, with traders citing support from a Redburn note raising its earnings estimates and repeating its "buy" rating on the lender.
"Positive margin pressures continue to intensify in UK banking thanks now to a pronounced drop in both household deposit costs and wholesale funding rates," Redburn said.
Staying with financials, fund managers were also in demand with traders citing the influence of recent strong fund flow data, as well as some broker comment.
Weekly inflows into equity funds hit a five-year high in the first full week of January, according to EPFR Global, with European equity funds enjoying brisk inflows as support for the financial system from central banks, an easing of euro zone debt risks and a U.S. budget deal fuelled appetite for equities.
Schroders was a strong performer, up 2.7 percent, with traders saying the stock was also lifted by an upgrade to "overweight" by HSBC in an asset management review.
HSBC downgraded its rating for Aberdeen Asset Management to "neutral", but the shares gained 1.5 percent, buoyed by the fund flow data and more positive comment from JP Morgan Chase, which raised its target price.
U.S. blue chips were flat by London's close, but the tech-laden Nasdaq composite shed 0.4 percent, hurt by a 13 percent drop in shares of tech giant Apple on iPhone 5 demand concerns.
Mid-cap British computer chip firm Imagination Technologies was a leading FTSE 250 faller, dropping 6.4 percent after a downgrade in rating from Goldman Sachs, with the bank removing the stock from its "Conviction buy" list.
Accounting software firm Sage Group was also under pressure following a broker downgrade, shedding 1.2 percent as Barclays cut its rating to "underweight", citing concerns over increasing competition and the stock's valuation.
A broker downgrade also weighed on Associated British Foods, down 2.0 percent, with Nomura cutting its stance for the sugar producer to clothing retail group to "neutral" from "overweight". The firm is due to issue a first-quarter trading update on Thursday.
AB Foods was the most-traded blue chip stock at over twice its 90-day daily average, with overall FTSE 100 volume about 86 percent of its daily average.
(Editing by Hugh Lawson)
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