Reuters: Hot Stocks: Britain's FTSE dips before Cypriot banks reopening

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Britain's FTSE dips before Cypriot banks reopening Mar 27th 2013, 17:15 Wed Mar 27, 2013 1:15pm EDT * FTSE 100 closes down 0.2 percent * Cyprus banks set to re-open on Thursday * Financials fall as worries remain over debt burden * UK banks outperform over shortfall relief * IAG down as it ups bid for Vueling By David Brett LONDON, March 27 (Reuters) - Britain's top shares closed lower in a choppy session on Wednesday, with Cypriot banks due to reopen on Thursday and fears growing that the euro zone is slipping back into crisis. A Greek newspaper reported the island will impose a ban on cashing cheques and limit the amount of cash that can be taken out of the country under measures to avert a run on its banks. London's blue chips have fallen 1.6 percent since the full extent of Cyprus's problems became known two weeks ago, with investors increasingly worried that its bailout outlines a new template that will make the private sector pay more for future euro zone rescues. London's blue chips closed down 11.81 points, or 0.2 percent at 6,387.56, above the intraday low of 6,344.19 and bouncing off 6,380, its 3-month rising support level - one technical measure of support for a market that is trending up when viewed in the longer term. "Tight capital controls in Cyprus will likely prevent the hemorrhaging of funds in the short term," Matt Basi, head of Premium client management at CMC Markets, said. "But with a four day (Easter) weekend in store and the propensity of European politicians to misspeak on matters of international importance, investors can not be blamed for taking a slightly more cautious approach," he said. Top risers on the FTSE 100 were the more defensive health care and consumer staples sectors - companies which provide products and services that are less affected by austere macro economic conditions. Cyprus probably won't be the last euro zone country to ask for an international bailout, according to a Reuters poll of economists, who cited Spain and Slovenia as the likeliest candidates. Concerns that problems will spread further within the euro zone and worries about the political deadlock in Italy sent yields on five-year Italian government bonds to their highest since October last year at its latest auction. Weakness in the euro zone also added to persistent talk of a recession in the UK - the euro zone is its biggest trading partner - as the latest data showed gross domestic product fell 0.3 percent quarter-on-quarter in the October-December period. Economic data needs to improve if equity valuations - which have rerated to post-credit-crisis highs of around 12 times price-to-earnings on the FTSE 100 - are to be justified. Investors are not panicking yet though. Deutsche Bank kept its positive view on equities hoping that stronger U.S. economic growth and a stabilisation in global growth will be enough to turn around declining earnings estimates. Analysts have downgraded earnings expectations for the next 12 months by 2.9 percent over the last 90 days, Thomson Reuters StarMine data shows. FINANCIALS FALL With the outlook for the euro zone murky at best, financials were the sharpest fallers - given their exposure to Europe's debt crisis. Interdealer broker ICAP shed 6.3 percent after issuing a profit warning as the latest chapter in the crisis dashes hopes of the buoyant trading volumes of early this year continuing. Britain's largest insurer Prudential fell 4.3 percent after the company was fined 30 million pounds ($45.5 million) for failing to tell the UK financial regulator about its ill-fated takeover attempt of Asian rival AIA around three years ago. Prudential was also among a batch of London blue chips that were trading without their dividend entitlement including British Land, BSkyB, Schroders and Smiths Group. UK banking stocks bucked the weaker trend as investors initially reacted positively to a Bank of England committee's call for them to raise 25 billion pounds ($38 billion) in capital to absorb possible future losses, at the low end of the forecasted range. Royal Bank of Scotland, however, fell 3.1 percent with Investec reminding investors the bank will be "encouraged" to issue around 450 million pounds of dilutive fresh equity in 2013 and saying its valuation had become stretched. Elswhere, British Airways owner IAG fell 2.3 percent after it raised its takeover offer for budget airline Vueling to 9.25 euros ($11.89) per share from 7 euros. Bucking the trend, the world's biggest tour operator TUI Travel rose 4 percent after a bullish update. (Reporting by David Brett; Editing by Ruth Pitchford) Link this Share this Digg this Email Reprints

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