FTSE falls as Italian woes hit banks

LONDON (Reuters) -The FTSE 100 index edged lower on Monday, led by financial stocks which fell on worries over Italy's economy after the country's prime minister said he would resign.

Traders had mixed views over whether the fall would be temporary, with some still expecting a traditional year-end rally, while others backed selling equities in case the stock market fell further.

The blue-chip FTSE 100 was down by 0.3 percent, or 17.63 points lower, at 5,896.77 points by around midday, halting a three-week rally, with the index having risen more than 5 percent from a low of around 5,600 points in mid-November.

Italian Prime Minister Mario Monti said on Saturday that he would resign after the 2013 budget is approved, increasing political uncertainty in the heavily indebted country and probably bringing forward elections to February.

Hartmann Capital trader Basil Petrides said the uncertain outlook meant investors should book profits on the back of recent gains on equities, with the FTSE 100 up around 6 percent so far since the start of 2012.

"If you've got profit on the table, it should be banked. At the moment, I have a short-term negative bias. The market could gently trickle lower," he said.

Banks and insurers, which are exposed to the euro zone's debt crisis due to their sovereign bond holdings, were among the worst-performing sectors, and Petrides said he had "short" positions out on that sector to bet on further falls.

The FTSE 350 banking index was down by 0.8 percent, with HSBC accounting for much of the FTSE 100's fall as it slipped 0.7 percent.

Worries over a deterioration in the euro zone crisis also hit insurers, with Aviva falling 2.5 percent to make it the worst-performing FTSE 100 stock.

"I am 'short' on Barclays and Aviva," said Petrides.

YEAR-END RALLY?

Securequity sales trader Jawaid Afsar had a more positive outlook, expecting the market to have the year-end rally it traditionally experiences, despite the problems in Italy.

The FTSE 100 is also trading above the 50-day and 200-day simple moving average levels, which lie at around 5,800 points and 5,700 points, respectively, and which is often used as a sign by technical traders that the index could rise further.

Oriel Securities strategist Darren Winder said UK miners could be on track for a strong 2013, and Afsar also backed buying shares in that sector.

Afsar added he was considering buying shares in Barclays following the dip in the bank's share price. He said he could buy the stock at around the 240-245 pence level, with Barclays down 1 percent on Monday at around 249 pence.

Afsar said fund managers would still look to put money into shares ahead of the year-end, with stocks offering better returns via dividend payments than cash or sovereign bonds, where returns have suffered due to interest rates at historic lows.

"There are a lot of fund managers who are underweight on equities, and they'll be looking to put their money to work," he said.

(Reporting by Sudip Kar-Gupta; Editing by Louise Heavens)

Source: http://news.yahoo.com/ftse-100-retreats-euro-zone-concerns-080518146--finance.html

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