The FTSE 100 fell on Monday, as weakness in miners and engineers outstripped strength in defensive stocks after China cut its growth forecasts, while mixed economic data in Europe and the United States dimmed the outlook for global growth.
London's blue chip index <.FTSE> shed 36.31 points or 0.6 percent to 5,874.82, although it held within its recent tight range between 5,830 and 5960, in place since early February.
Volumes were weak and implied volatility <.VFTSE> rose 3.3 percent, suggesting concern had returned among investors, although the level remained at less than half the multi-year peaks set in September 2011.
Weighing on the FTSE 100 was the announcement that China, the world's most voracious consumer of raw materials, had cut its official growth target for 2012 to an eight-year low of 7.5 percent.
Chinese economic growth is an assumption that many investors have come to rely on and so anything less than perfection will be badly received, David Miller, partner at Cheviot which has assets under management of about 3.5 billion pounds.
A softening of growth in the world's second-biggest economy is bad news for the demand outlook for miners <.FTNMX1770>, which fell in tandem with base metals.
Global miner BHP Billiton
Commodities trader Glencore
Xstrata slipped 4.9 percent, but brokerage Killik said it likes the Glencore-Xstrata merger due to the ability to benefit from increased economies of scale in terms of project development, M&A clout, marketing and purchasing, while its preferred means of getting exposure to the combination is through Xstrata.
News that the euro zone's private sector shrank last month and Britain's dominant services industry expanded less than forecast, added to the economic gloom.
Mixed U.S. economic data also muddied the global growth outlook.
That did little to improve sentiment surrounding engineers such as Weir
Weir was already under pressure after Citigroup downgraded its rating for the pumps manufacturer to sell from neutral following recent full-year 2011 results.
Banks <.FTNMX8350> were also lower, weighed down by concerns of an outright default for Greece.
The country's Finance Minister, Evangelos Venizelos, warned Athens was ready to enforce losses on Greece's private sector creditors if they do not accept the country's debt swap offer, which traders said would almost certainly trigger credit default swaps on its bonds.
Preventing the UK's benchmark index from falling further was strength in defensive stocks, such as drugmaker GlaxoSmithKline
Oil services firm Petrofac
Testing firm Intertek
(Written by David Brett; Editing by David Holmes)