LONDON (Reuters) - British equity markets fell on Wednesday, snapping a four-day winning streak and heading for their worst monthly showing since last summer on concerns about the euro zone crisis and dampened expectations of growth-boosting measures from China.
With a light UK calendar, the spotlight was firmly on the European Commission's economic strategy for the euro zone, which is set to spell out measures to balance growth with unpopular fiscal consolidation that will be particularly pointed for Spain and Italy.
Concerns about Spain's ability to recapitalize its banks were reignited by signals from the European Central Bank that it is not prepared to step in.
In a further blow to investor sentiment, expectations of new growth-boosting measures from China took a knock when influential Chinese academics said Beijing should not launch a new round of aggressive fiscal stimulus. [ID:nL4E8GU0EG] Such expectations had been a key driver of market gains in recent sessions, as British companies look to China to support sales and help counterbalance slumping demand from the euro zone.
The benchmark FTSE 100 .FTSE fell 62.25 points, or 1.2 percent, by 0740 GMT, to 5,327.33, reversing the previous session's gains and heading for its worst month since August.
"It's centered around worries about Spain, coupled with China saying that there are no plans for any major stimulus," said Zeg Choudhry, head of equities trading at Northland Capital Partners.
"Everything is intertwined - UK's biggest exposure in banks is to France, but France's exposure to Greece and Spain is huge, so it's a domino effect ... It's all about people looking to keep their losses down."
New proof of UK's exposure to the euro zone crisis came from mid-cap Sportingbet SBT.L, with tough markets in Spain and Greece contributing to a 33 percent slump in underlying quarterly profit for the online gaming firm.
The UK banking sector fell 0.9 percent .FTNMX8350. Bigger losses, however, came from sectors which look to China for demand growth with heavyweight miners down 1.8 percent .FTNMX1770.
From a technicals viewpoint, the 10-day moving average - which has served as a floor for the past two sessions - gave way around the 5,335 mark, potentially opening the door for further weakness.
"We expect high volatility and nervous trading conditions to persist for the short-term," Jack Pollard, analyst at Sucden Financial, said in a note.
Reporting By Toni Vorobyova; Graphics By Scott Barber; editing by Stephen Nisbet