LONDON (Reuters) - The FTSE 100 fell on Wednesday, weighed down by miners after disappointing U.S. GDP data as investors considered whether the rally that has lifted the index to 4-1/2 year highs has further to run.
The FTSE 100 closed down 16.08 points, or 0.3 percent, at 6,323.11, having climbed some 20 percent from its June lows.
The data, which showed the world's largest economy suffered an unexpected contraction in the fourth quarter, knocked the index even as it buoyed expectations the U.S. Federal Reserve will continue its easy monetary policy.
The Fed is expected to maintain asset buying at $85 billion a month when it concludes its policy meeting later in the day and stick to its commitment to hold interest rates near zero until the unemployment rate falls to 6.5 percent.
Heavyweight miners were the biggest casualties on Wednesday, led down by an 8.3 percent drop from Chilean miner Antofagasta which said its production costs would jump this year and it would not increase output.
Charts show the strong rally has propelled the UK benchmark heavily into 'overbought' territory, fuelling some expectations of a pull-back.
The FTSE 100's 14-day relative strength index (RSI) - a widely-used technical momentum indicator - was at 80, with a reading of 70 and above deemed to be 'overbought'.
However some strategists see further gains in equity markets thanks to liquidity support from central banks, an improving global economic outlook, and robust earnings.
"I would be reluctant to say (the grind higher) has gone too far. When we look at fundamentals, I would fully expect earnings forecasts to be met this year; I think the economy can support that," Ian Richards, head of equity strategy at Exane BNP Paribas, said.
Angus Campbell, head of market analysis at Capital Spreads, meanwhile, said: "It's just interesting to see that any dips have been really short-lived this year which just goes to show that there's still momentum in the uptrend."
Imperial Tobacco also knocked the FTSE 100, the biggest drag on the index on Wednesday in terms of points, after saying it expects growing competition from the black market in cigarettes to hit its first-half profits.
Its shares fell 4.3 percent in brisk trade, with volume at 323 percent of its 90-day daily average against the FTSE 100 on 104 percent of its 90-day daily average.
Oil services stocks weakened, impacted by a profit warning from Italy's Saipem.
Petrofac was left nursing a 7 percent drop, while Wood Group shed 2.2 percent, and Amec traded 2.1 percent lower.
Reporting by Tricia Wright; editing by Ron Askew