Strong gains in the banking sector weren't enough to lift the FTSE 100 into positive territory on Monday morning, as London's benchmark index pulled back from its near two-year high on Friday.
"Stock markets in Europe have surrendered early morning slim gains as the temptation to book profits on major stock indices proved far too much for traders," said market strategist Ishaq Siddiqi from ETX Capital.
"Given the strong start to 2013 and the 1Q period now in full-swing with 4Q earnings and heavy tier-one macro data, traders are unwinding their positions in risky assets, opting to wait for more cues before making any bold moves," he said.
The FTSE 100 finished Friday at 6,090; just one point shy of the February 8th 2011 high of 6,091. Including today's fall, the FTSE 100 has risen by around 3% so far during the first few trading days of 2013.
Investors will be keeping close eyes on decisions from central banks this week. Neither the Bank of England (BoE) nor the European Central Bank (ECB) are expected to make a move this week.
However, until the budget negotiations Stateside are decisively concluded, economic uncertainty is expected to continue to cast a cloud over decision making, albeit to a lesser extent than was feared before last week's fiscal cliff agreement, "so that the need for further easing cannot be dismissed", according to analysts at Digital Look. "Unwelcome surprises out of the Eurozone" would also be a factor, they said.
FTSE 100: Banks gain on eased regulation
Banking giant Barclays was the high riser of the day after regulators eased rules on cash buffers, giving lenders more time and greater flexibility to comply with Basel III liquid coverage ratio requirements. Sector peers Lloyds and HSBC were also on the up.
"Less strict liquidity rules should reduce pressure on banks, thus helping provide a further boost to confidence and the real economic growth, all else being equal," explained analysts at Barclays Research.
After a sharp move higher in early trading, supermarket giant Morrisons was flat by midday after a disappointing Christmas trading update with sales (ex fuel) falling 0.9% in the six months to December 30th. Goldman Sachs, Espirito Santo, Panmure Gordon, Oriel Securities and Shore Capital all reiterated their 'sell' ratings for the stock this morning.
British American Tobacco was lighting up after Deutsche Bank upgraded the shares
from 'hold' to 'buy', saying that the current price is a "solid entry point to a high-quality stock". Imperial Tobacco, which remains the broker's top pick across European Tobacco names, was also higher this morning.
Insurance giant Legal & General gained after saying that it has improved the return on equity (RoE) and profitability of new business within its American subsidiary after completing a further phase of its capital efficiency programme.
The stock was also upgraded this morning to 'hold' by Investec as part of its review of the life insurance sector. As part of this review, the broker cut its recommendation for counterpart RSA to 'sell', causing shares to drop.
FTSE 250: Bumi gains after battling agains weak coal prices
Mining group Bumi rose after saying that it continues to target a medium-term production target of 30mt each year and in light of the weak coal price environment, it will focus on lower cost pits and defer some of its expansion plans.
Also flying higher was budget airline easyJet after it managed to increase both its passenger numbers and load factor in last month.
High Street betting shop Ladbrokes gained after confirming speculation that it is in talks to buy Irish betting exchange Betdaq.
FTSE 100 - Risers
Barclays (BARC) 286.80p +3.65%
Eurasian Natural Resources Corp. (ENRC) 309.90p +1.74%
Meggitt (MGGT) 412.40p +1.45%
British American Tobacco (BATS) 3,214.50p +1.26%
Lloyds Banking Group (LLOY) 50.48p +1.24%
ITV (ITV) 109.50p +0.92%
Kazakhmys (KAZ) 818.00p +0.80%
Legal & General Group (LGEN) 152.10p +0.66%
HSBC Holdings (HSBA) 671.80p +0.63%
Hargreaves Lansdown (HL.) 724.50p +0.49%
FTSE 100 - Fallers
National Grid (NG.) 695.50p -2.18%
Centrica (CNA) 334.00p -2.05%
Weir Group (WEIR) 1,933.00p -1.88%
Fresnillo (FRES) 1,776.00p -1.88%
Severn Trent (SVT) 1,582.00p -1.74%
Rolls-Royce Holdings (RR.) 902.50p -1.69%
United Utilities Group (UU.) 673.00p -1.68%
Randgold Resources Ltd. (RRS) 5,880.00p -1.59%
Associated British Foods (ABF) 1,558.00p -1.39%
Babcock International Group (BAB) 996.00p -1.29%
FTSE 250 - Risers
Imagination Technologies Group (IMG) 457.40p +4.43%
Heritage Oil (HOIL) 208.10p +4.21%
Bumi (BUMI) 277.00p +3.09%
Centamin (DI) (CEY) 40.40p +3.06%
COLT Group SA (COLT) 98.55p +2.66%
easyJet (EZJ) 838.50p +2.13%
Morgan Crucible Co (MGCR) 280.70p +1.92%
International Personal Finance (IPF) 404.70p +1.89%
Brewin Dolphin Holdings (BRW) 213.20p +1.77%
Ocado Group (OCDO) 86.85p +1.76%
FTSE 250 - Fallers
New World Resources A Shares (NWR) 318.30p -3.78%
Vesuvius (VSVS) 367.70p -3.44%
Renishaw (RSW) 1,956.00p -3.26%
ITE Group (ITE) 228.00p -3.06%
Berkeley Group Holdings (The) (BKG) 1,748.00p -2.78%
BTG (BTG) 344.10p -2.66%
Dixons Retail (DXNS) 28.14p -2.46%
Synergy Health (SYR) 1,072.00p -2.10%
Kenmare Resources (KMR) 33.60p -2.04%
Alent (ALNT) 321.00p -2.01%