* FTSE 100 down 0.7 percent
* Earnings woes hit heavyweights Shell and AstraZeneca
* Bank face huge claims from swaps scandal
* BSkyB cheered by online sports offer
By David Brett
LONDON, Jan 31 London's top shares closed lower
on Thursday as downbeat company earnings and mixed global
economic data triggered the sharpest one-day fall on the FTSE
100 since mid-November.
Earnings were in focus after updates from British oil
heavyweight Royal Dutch Shell and drugmaker
AstraZeneca, and Facebook Inc in the United
Shell alone took 16 points off the blue chip FTSE 100
index after its fourth quarter profit came in nearly
$400 million short of expectations.
The FTSE closed down 46.23 points, or 0.7 percent at
6,276.88, edging away from mid-May 2008 highs of 6,376.
AstraZeneca shed 3.1 percent after warning of a tough year
ahead, while in the United States No.1 social network Facebook
fell 3.8 percent after its growth trailed the more aggressive
Temporary power provider Aggreko took its losses
over the last five trading days to more than 11 percent, with
traders citing recent press speculation about the potential for
another warning on earnings when it reports in March.
British banks meanwhile face another round of
compensation claims that could total billions of pounds after
the regulator found they had widely mis-sold complex
interest-rate hedging products to small businesses.
Royal Bank of Scotland shed 1.1 percent.
Retailer Kingfisher fell 1.5 percent after Nomura
cut its target price and earnings estimates by 6 percent on the
firm as it took a more pessimistic view of the UK market.
Recent results have put a dampener on investor optimism,
which helped push markets up towards four-and-a-half year highs.
While 70 percent of European companies have so far beaten or
met earnings estimates in the current reporting season, top
analysts still expect fourth-quarter growth to fall 8.8 percent
After rallying 6 percent in January, Shore Capital
strategist Gerard Lane said the FTSE looked "way too high given
the near-term risks to earnings and the U.S. fiscal worries".
"However, I still think the FTSE 100 will see 7,000 by the
year-end and if you are a smart investor you invest for the
7,000 now rather than wait for a correction that might never
happen," he added.
British investment managers sharply increased their exposure
to stocks in January as concerns of more financial instability
receded and the market's recovery gathered pace, a Reuters poll
showed on Thursday.
But while broadly expecting the stock market recovery to
continue, they cautioned that a risk of setbacks remains, with
many of the world's economic problems still not fully resolved.
"Our view remains that however well the economic rebound
proceeds, this recovery will still lack the strength seen in
other rebounds," Percival Stanion, Chairman of the Strategic
Policy Group at Baring Asset Management, said in a note.
"Deleveraging will continue; deficits will be reduced;
households will tighten their belts. The journey will still be
long, but one that is getting shorter with every step," he said.
Investors greeted BSkyB's offer to show its popular
sports channels online for a daily fee with enthusiasm, pushing
the shares up 1.0 percent. The company is seeking new customers
to offset slowing growth at its core pay-TV service given
sluggish consumer spending.
Diageo was a top riser, up 1.3 percent after the
world's biggest spirits group ended talks to buy a stake in
top-selling tequila brand Jose Cuervo.
Mixed macroeconomic data did little to imbue investors with
the confidence needed to plough fresh money into markets already
at multi-year highs.
Weak U.S. GDP data and downbeat comments from the Federal
Reserve overnight were followed by jobless claims on Thursday,
which pointed to a slow healing of the U.S. labour market.
Incomes in the world's biggest economy, however, rose in
December by the most in eight years while U.S. Midwest business
activity picked up to a nine-month high.
"Investors now seem likely to sit on the sidelines hoping to
glean clues from tomorrow's non-farm payroll data," a
London-based trader said.
U.S. employers are expected to have added 160,000 jobs to
their payrolls in January after an increase of 155,000 in
December. The unemployment rate is seen holding steady at 7.8
(Editing by Catherine Evans)