Recovery worries hit FTSE as S&P downgrades Ireland

* FTSE falls 0.5 pct as recovery concerns hit sentiment

* Banks drop as S&P cuts Ireland’s credit rating

* Energy, miners drop as risk appetite ebbs

By David Brett

LONDON, Aug 25 (BestGrowthStock) – Europe’s sovereign debt issues
and global recovery concerns weighed on Britain’s top share
index on Wednesday after Standard & Poor’s downgraded Ireland’s
credit rating, which more than offset good UK company results.

By 1050 GMT the FTSE 100 (.FTSE: ) was down 23.53 points, or
0.5 percent, at 5,132.42., after closing 1.5 percent lower at
5,155.95 on Tuesday, its lowest finish since July 20.

The index faced strong resistance at around 5,189.73 — its
38.2 percent Fibonacci retracement of a fall from a high in
April to a low in July.

Recent concerns surrounding the sustainability of the global
economic recovery were given credence after Standard & Poor’s
cut Ireland’s long-term rating by one notch to ‘AA-‘, the
fourth-highest investment grade, and assigned the country a
negative outlook late on Tuesday. [ID:nLDE67O0D7].

“The market is very data driven at the moment and there’s
not a lot of good news to go on,” said Philip Gillett, trader at

UK banks (.FTNMX8350: ) were among the top fallers, echoing
the struggles of their Irish counterparts, with Royal Bank of
Scotland (RBS.L: ) down 0.9 percent.

British 10-year gilt yields fell to a record low of 2.825
percent on Wednesday, compared to a dividend yield of 3.54
percent for UK blue-chip equities.

Valuations for the UK benchmark remained cheap. Its one-year
forward price-to-earnings stood at 9.96 against a 10-year
average of 14.88, according to Thomson Reuters Datastream.

On the macroeconomic front, U.S. durable goods are due at
1230 GMT, while July’s U.S. new home sales and the Federal
Housing Finance Agency house price index for June are both due
at 1400 GMT.


Energy shares (.FTNMX0530: ) retreated sharply as investors
sold out of riskier assets. Oil explorer Tullow Oil (TLW.L: ) shed
5.6 percent. It said development of its Ugandan oil fields would
be delayed, which overshadowed upbeat results. [ID:nLDE67O06B]

Cairn Energy (CNE.L: ) bucked the trend, adding 0.5 percent as
UBS upgraded its rating, arguing there is potential upside to
its sale of Cairn India and a gas discovery in Greenland.

State-run Oil and Natural Gas Corp (ONGC.BO: ) is divided over
making a counter-bid for Cairn India (CAIL.BO: ), which is the
target of a $9.6 billion takeover offer by Vedanta (VED.L: ), the
Business Standard paper mreported on Wednesday. [ID:nSGE67O04D]

Miners were lower, with BHP Billiton (BLT.L: ) down 0.3
percent as a cautious outlook took the shine off soaring
second-half profits. [ID:nSGE67O017]

“After the credit crisis firms have become more efficient
but now those efficiencies have been implemented the problem
they have now is whether the outlook is that strong, and the
consensus is that it is not,” Spreadex’s Gillett said.

BHP also tried to dampen expectations it would substantially
raise its hostile $39 billion bid for Potash Corp (POT.TO: ),
saying it won’t buy Potash at any cost.

Miners African Barrick Gold (ABGL.L: ) and Fresnillo (FRES.L: )
rose 0.3 and 0.2 percent respectively as investors sought the
safe-haven qualities of precious metals.

On the upside, Admiral Group (ADML.L: ) topped the FTSE 100
leader board, up 3.8 percent. The car insurer said it expected a
strong full year, adding to recent robust earnings reports from
the top UK insurance companies. [ID:nLDE67N0EP]

Serco (SRP.L: ) rose 2.8 percent after the British outsourcing
company said half-year pretax profit was up more than 20
percent, defying concerns that support services companies will
suffer from swingeing government spending cuts. [ID:nLDE67O07W]
(Editing by Michael Shields)

Recovery worries hit FTSE as S&P downgrades Ireland