LONDON The FTSE 100 fell from five-year highs on Wednesday, retreating from a key technical resistance and leaving some investors bracing for further falls in the remainder of the month.
The FTSE 100 closed down 29.12 points, or 0.5 percent, at 6,481.50 after failing to break above its January 2008 high at around 6,534 the previous day - a level some investors were starting to see as a turning point, or "pivot".
The index's 14-day Relative Strength Index, a momentum indicator, was retreating from "overbought" territory after hitting a high last seen in early February, when it was also followed by a selloff.
These were seen as signs buying momentum was beginning to fade, leading some investors to book their profits on some of this year's strongest performers, such as security firm G4S, which retreated from all-time highs.
"We might well have seen the high for March," Andy Ash, head of sales at Monument Securities, said. "Probably we're going to have pivot."
He cited concerns about a new debt crisis in Italy, as highlighted by a weak auction on Wednesday, and difficult fiscal talks in the United States as possible catalysts for the downturn.
The health of the world's largest economy has been a key driver for the FTSE, which cut losses in afternoon trade on Wednesday after robust U.S. retail sales data.
It still underperformed its main continental peers, France's Cac and Germany's Dax, as a number of stocks started to trade without entitlement to their latest dividend, including heavyweights British American Tobacco and Standard Chartered.
Bucking the trend was Britain's biggest insurer Prudential, which raised its dividend on the back of soaring profits, sending its shares up 9.3 percent in volume three times its 90-day average.
Ronnie Chopra, head of strategy at Tradenext, said the rally provided an opportunity for contrarian trade, built selling Prudential and buying its struggling rival Aviva, which cut its dividend earlier this month.
The spread between both companies' share prices hit an all-time highs on Wednesday, Thomson Reuters data showed, and Chopra said the valuation gap could revive speculation of a Prudential bid for Aviva.
"If Prudential wants to be predatory and buy Aviva they probably wouldn't get a better time in terms of the valuation disparity between both companies," he added.
(Reporting By Francesco Canepa; editing by Ron Askew)