Mining and banking stocks pulled the FTSE 100 Index into the red today despite strong gains for microchip designer ARM and Marks & Spencer.
The London market closed 24.4 points lower at 6019.5 in a reversal of earlier gains that had seen it hit a new 30 month high.
The Dow Jones Industrial Average on Wall Street also sank into negative territory amid cautious ahead of tomorrow’s keenly-watched US jobless claims figures.
Joshua Raymond, market Strategist at City Index, said many were looking to take profits off the table after a recent strong run.
He said: “The FTSE 100 gave up its day’s gains after a poor afternoon session saw investors sell out of heavyweight commodity stocks citing a rising US dollar pressurising metal and crude prices.
“Much of the dollar’s strength and subsequent FTSE weakness was triggered in part by traders locking in profits and reducing positions in risky asset classes ahead of Friday’s all important jobs data.”
Silver miner Fresnillo sank to the bottom of the index, losing 89p to 1578p, while Lonmin was not far behind, shedding 30p at 1910p. Banks such as Royal Bank of Scotland and Lloyds were also down, falling 0.4p to 40.4p and 1.2p to 67.2p respectively.
The pound dropped back after Services PMI for December slowed for the first time in 20 months showing a surprise contraction to 49.7, suggesting fourth-quarter GDP growth could be slightly below expectations. Sterling was down against the US dollar at 1.54.
Advances from the likes of ARM failed to offset drops in the banking and mining sector, while fears for the retail sector were compounded after FTSE 250 firm Mothercare issued a surprise profits warning following the pre-Christmas snow.
The stock slumped 5% – down 33p to 565p – as it joined Next, HMV and Clinton Cards in highlighting the impact of December’s snow.
Cambridge-based technology firm ARM was one of the day’s biggest risers after computing giant Microsoft confirmed it would run the latest version of its flagship Windows software on the company’s microchips.
The deal is a coup for ARM, analysts said, and will allow both companies to push into the high-end tablet market, which includes products such as Apple’s iPad. The stock jumped to a 10-year-high earlier in the session before closing up 2% or 10.6p to 482p.
Retailers Next and Tesco were shaken by the low confidence in the sector, and fell 29p to 2074p and 6.7p to 430p respectively. But high street giant Marks & Spencer posted gains, up 14p to 389p.
Rolls-Royce was another riser, up 5p to 659p, after it completed contracts for Trent 900 and Trent 1000 engines to power up to 61 new wide-body aircraft with British Airways.
The deal will appease investors shaken by safety fears about the Trent 900 after the explosion which forced Australian carrier Qantas to ground its fleet of A380 superjumbos.
BA also moved higher, up 12.6p to 300.2p, in spite of news that it expects the snow disruption to cost it around £50m (€59m) in the third quarter.
BP was in the spotlight after a damning report from a US presidential commission, which accused BP of taking “short cuts” which led to the Gulf of Mexico oil spill disaster.
The official inquiry also found firms Halliburton and Transocean partly to blame, which analysts said would limit the burden faced by BP. Shares spent much of the day in the black, but closed down 2.4p to 496.9p as the wider sentiment turned.
Outside the top flight, Clinton Cards slumped 3p to 25p after its latest profits warning, while Halfords dropped 2.5p to 437.5p as investors speculated that its portfolio of out-of-town stores may have struggled in the snow.
Household products maker McBride was one of the biggest FTSE 250 fallers after it said its results will be towards the lower end of expectations. Shares were 10.8p lower at 173p.
The biggest Footsie risers were British Airways up 12.6p at 300.2p, Marks & Spencer ahead 13.2p at 388.2p, Resolution up 8.2p at 243.3p and BAE Systems ahead 9.1p at 350.9p.
The biggest Footsie fallers were Fresnillo down 89p at 1578p, Essar Energy off 19p at 556p, Antofagasta down 49p at 1537p and African Barrick Gold off 18.5p at 581.5p.