October 22, 2012 / 7:19 AM / 8 years ago

Earnings concerns weigh on shares

LONDON (Reuters) - Britain’s top share index lost ground on Monday, extending declines on concerns about upcoming third quarter earnings.

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

Drugmakers dipped, with Shire down 1.8 percent and AstraZeneca off 0.5 percent. The firms kick off the heavyweight sector’s results season on Thursday.

According to Thomson Reuters Starmine data, of the 8 percent of European companies that have reported results so far, nearly half have missed forecasts.

TR Starmine analysts have estimated year-on-year third-quarter earnings growth at 7.6 percent in Europe, while the average for companies that have already reported is a 4.2 percent drop.

At the close, the FTSE 100 was down 17.82 points, or 0.3 percent, at 5,882.91 points, having shed 0.4 percent on Friday to snap a four-session winning streak.

UK blue chips tracked weakness in their U.S. peers, with the Dow Jones off 0.3 percent by London’s close, having dropped sharply on Friday, also pressured by earnings concerns.

Among the U.S. fallers, mining company Freeport-McMoRan lost 0.9 percent after its third-quarter profit fell sharply, missing Wall Street estimates.

UK-listed miners, however, featured on the FTSE leaderboard, steadying after falls on Friday, with traders citing support from positive European strategy comments from Morgan Stanley.

The bank’s strategists switched their preference to miners from chemicals within European materials, which is their preferred cyclical sector, citing relative valuations and signs of an improving economic outlook in China.

“I think the mining sector is not that widely owned, particularly amongst the UK long-only community. Miners have been consensus underweight for some time, and therefore people at a minimum will start closing their underweight positions, which will put upward pressure on share prices”, said Graham Secker, equity strategist at Morgan Stanley.

Gold miner Randgold Resources and following a hike in target price by Societe Generale to 9,000 pence from 7,600.

Precious metals firm Johnson Matthey missed out on the sector gains, falling 2.1 percent having spiked by a similar amount in the previous session on speculative interest.

Andrew Gibson, Head of Research at Galvan said the share represented a buying opportunity, citing technical factors.

Reporting By Francesco Canepa; Editing by John Stonestreet

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