Miners lead FTSE lower

London - Britain's top share index retreated 0.2% early on Wednesday, as commodity stocks weakened and investors booked profits after a seven-day winning streak.

By 10:12 the FTSE 100 was down 6.78 points at 4 474.39, its first day in the red since July 10.

Moves were generally muted but commodity stocks, which have rallied on stronger raw materials prices, fell back as metal prices stabilised and crude retreated below $65 per barrel.

Rio Tinto, Kazakhmys, Eurasian Natural Resources, Anglo American, Lonmin and BHP Billiton fell between 1% and 2.8%.

BP and Royal Dutch Shell fell 0.9% and 0.3% respectively.

"Experience tells us that the market doesn't go up for more than seven or eight days in a row and people were getting the feeling that the market (was overbought)," said Jim Wood-Smith, strategist at Williams de Broe.

Banks were mostly lower. Barclays, Standard Chartered, Royal Bank of Scotland and Lloyds Banking Group fell 0.1% to 2.1% but heavyweight HSBC added 0.6%.

Insurers which tend to be sensitive to retreating risk appetite were among the biggest fallers.

Aviva, Friends Provident, Legal & General, Prudential, Standard Life and Standard Life fell between 1.7% and 2.8%.

Defensiveness in demand

Defensive stocks were in demand with tobacco stocks, utilities and food producers among the main supports for the index.

British American Tobacco added 0.7%, Severn Trent gained 1.6% and Cadbury put 0.7%.

Pharma groups AstraZeneca and Shire also moved higher, up 0.9% and 1% respectively, but GlaxoSmithKline missed out, losing 1% ahead of the firm's second-quarter results, due at 12:00.

London Stock Exchange shares fell 3.7% as stock traded ex-dividend.

Data reminded investors that the UK economy faces a long, slow road to recovery.

Britain's economy will return to growth in the last quarter of this year, as companies start to rebuild inventories, but strong growth will not return until 2013, the National Institute of Economic and Social Research said on Wednesday.

Across the Atlantic, US Federal Reserve Chairman Ben Bernanke on Tuesday said the outlook for the long-suffering US economy was improving, but supportive policies would be needed for some time to prevent rising unemployment from undercutting recovery.

Investors will watch Confederation of British Industry industrial trends data, due at 12:00, which is expected to deteriorate this month raising more jitters about the state of the UK economy.

-Reuters