Earnings weigh as FTSE runs out off of puff

LONDON (Reuters) - London's FTSE 100 fell on Tuesday as disappointment over earnings from the likes of BP and Fresnillo saw the three-day rally lose steam with investors awaiting a policy response from central banks to boost flagging global growth.

The FTSE 100 <.ftse> was 2.82 points lower, or 0.1 percent, at 5,690.81, having gained 3.6 percent over the previous 3 trading days and touched the psychologically key 5,700 level intraday for the first time in 10 days.

Tuesday's main faller was heavyweight oil major BP , down 2.8 percent, as the British oil company took a $5 billion (3.18 billion pounds) charge in its second quarter results - more than a typical three months worth of profits - in what was mainly a write down of the value of assets, tipping BP into a loss for the quarter.

Before the results BP scored 45 out of 100 for earnings quality according to Starmine data, lower than average for the region, which indicated future earnings will be difficult to sustain.

"It is such a thin market that we are seeing knee-jerk reactions to results," said Rupert Armitage, director at Shore Capital. The FTSE 100 had traded a miserly 7 percent of its 90-day average in early trade.

"The best case seems to be not be long of stocks going into the results, we have seen that with BP this morning. Shire have figures tomorrow and there is some nervousness ahead of that, so it seems better to have travelled than arrived," Armitage said.

Fresnillo fell too, down 2.1 percent, as the world's largest primary silver producer said first-half profit dipped 9 percent on the back of weaker average silver prices and rising costs.

Weir's shed 3.9 percent after the engineer reported a 27 percent rise in first-half profit as investors banked recent gains ahead of the release on the engineer.

The UK banking sector <.ftnmx1770> came under pressure, following sharp gains over the last four trading days, as poor results from European peers UBS and BBVA helped cap momentum in the sector.

The earnings season has proved a damp squib for European companies, reflecting the harsh economic environment companies are trading in.

Not including Tuesday's results, nearly half the companies due to report earnings have done so, 47 percent have missed forecasts with second-quarter year-on-year growth expected to have contracted by more than 20 percent once all companies have released their results.

POLICY RESPONSE

With the sustainability of earnings a major concern for investors financial markets are looking for a clear policy response on Thursday after European Central Bank President Mario Draghi said last week that, within its mandate, the central bank was ready to do whatever it takes to preserve the euro.

On a further bullish note, on Tuesday Italian Prime Minister Mario Monti said he and Europe are starting to see the light at the end of the tunnel of problems for the euro.

"The words will be chosen carefully to satisfy the markets that the ECB is willing to act and at the same time signal to the targeted countries, likely Spain and Italy, that ECB support is not a substitute for economic reform," UBS said in a note.

"We are with consensus looking for unchanged policy rate at this meeting, although we do expect a 25 basis point rate cut at the September meeting," it said.

As a barometer of investor confidence the put/call ratio on Euro STOXX 50 <.stoxx50e> dropped to a one-month low on Monday, as investors grow more convinced about the European equities on expectations of stimulus actions from the ECB and the U.S. Federal Reserve.

The U.S. Federal Reserve, which starts its two-day policy meeting on Tuesday, was also in focus with some investors anticipating the Fed will opt for some form of monetary stimulus to boost flagging growth.

(Written by David Brett)

Source: http://news.yahoo.com/ftse-flags-three-day-rally-awaits-policy-response-071320210--finance.html

penn state ufc Ernie Els Teen Choice Awards 2012 Aurora victims usher James Holmes