March 14, 2012 / 6:08 PM / 5 years ago

REFILE-Miners drag FTSE into red after 5 days of gains

* FTSE 100 down 0.2 pct

* Banks up after U.S. banks' stress tests

* L&G jumps 7.2 pct as results beat forecasts

By Tricia Wright

LONDON, March 14 (Reuters) - Britain's top share index retreated on Wednesday, having flirted with the 6,000 level due to a more promising global economic outlook and robust earnings, with heavily weighted miners hit by concerns over Chinese demand.

After five successive days of gains, the longest winning streak since last summer, the FTSE 100 ended down 10.48 points, or 0.2 percent, at 5,945.43, after an intra-day peak of 5,989.07.

Miners were responsible for taking the index into the red with 11.2 points of downside, as they tracked copper prices lower on uncertainty about the outlook for demand from top consumer China, which has tempered its economic growth expectations.

Underpinning overall sentiment, however, the U.S. Federal Reserve improved its outlook on economic growth for the world's largest economy on Tuesday and said most large U.S. banks had passed their annual stress tests.

The news had a positive effect on UK banking stocks , the standout risers on the FTSE 100 index, with investors already heartened by upbeat data on Tuesday including German ZEW sentiment.

The sector's robust gains came in spite of heavyweight HSBC trading ex-dividend on Wednesday.

"If global business confidence indices continue to make ground, then I think the cyclical elements of the UK FTSE 100 - mining, industrial goods, aerospace, and even the oil sector - could all gain ground," said Edmund Shing, head of European equity strategy at Barclays Capital.

"That's the momentum you need to sustainably break and hold the 6,000 level."

EARNINGS MOMENTUM

Insurers fared well, led higher by a 7.2 percent jump in Legal & General, the top UK blue-chip riser, after it unveiled forecast-busting full-year profits and hiked its dividend by more than a third.

"L&G has reported a very good set of FY results this morning with higher than expected cash and dividend the main highlights," BofA Merrill Lynch said in a note, repeating its "buy" rating on the stock.

Merrill said L&G shares had performed well so far this year, up around 20 percent, and it expected the stock's re-rating to continue.

Peer Prudential, which posted solid earnings on Tuesday, rose 2.9 percent.

Neil Dwane, CIO Europe at Allianz Global Investors, argued that UK equities, with a current price/earnings ratio of around 11 times and a yield of nearly 4 percent, remain attractively valued.

"With monetary easing in the UK and globally showing no signs of abating and investors still hunting for income, equities become, even after the rise of the last three years, a safer and safer place to invest," he said.

Giving investors further cause for optimism, earnings momentum, or the pace of earnings downgrades - in the past a good indicator of changes in the equity market direction - is starting to slow.

"We're in the positive camp," said Robert Parkes, equity strategist at HSBC. "We think the rally can continue and that we're through the worst now in terms of the earnings downgrade cycle."

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