By Rebekah Curtis
By 9:04 a.m., the FTSE 100 was down 7.52 points, or 0.2 percent, at 4,201.49 points.
A banks rally helped spur the FTSE index 3.9 percent higher in the previous session, when Barclays sky-rocketed more than 73 percent after saying it would not need fresh capital.
Barclays, which took a hammering over the past two weeks, surged 11.6 percent early on Tuesday. Royal Bank of Scotland jumped more than 15 percent, leading the FTSE gainers, and Lloyds Banking Group added 7 percent.
However analysts cautioned that the rally may not be sustainable.
"Concerns around the banking sector may dissipate a bit but they'll continue hovering in the background," said Peter Dixon, an economist at Commerzbank.
"For the next six months there is no upside," Dixon said. "People are shell shocked after the events of the last couple of weeks. It's as if people are used to watching the red on the screens now."
Energy shares Royal Dutch Shell and BG Group fell 1.3 and 1.5 percent, respectively, falling back from strong gains the day before. Crude oil rose to about $47 a barrel after falling overnight.
Topping the losers in London, plumbing and heating supplies group Wolseley fell 5 percent.
Wolseley stock fell about 30 percent on Monday, when it said its half-year profit would more than halve as housing markets continued to slow and it was hit by the recent weakness of the pound.
It was further pressured on Tuesday after RBS and Panmure cut its price target.
Real estate company British Land dropped 3.3 percent after Goldman Sachs put the stock on its "conviction sell" list. Liberty International , Segro and Land Securities also fell after Goldman cut its price targets on the stocks.
"The recent speed of deterioration in the UK commercial real estate market significantly increases the risks for a number of the UK REITs from simply sitting tight until the worst of the storm passes," Goldman said in the note.
FRIENDS REASSURING
Friends Provident jumped 6.3 percent after the life insurer reassured on its capital strength and said it was maintaining its dividend, as it reported an 11 percent decline in full-year sales, which was still ahead of analysts' forecasts.
Water company Severn Trent fell 5 percent after it said lower water use by businesses was likely to hit its annual revenues more than expected, although it said trading was otherwise meeting its hopes.
In the United States, stocks rose in choppy trade on Monday, lifted by optimism over a $68 billion takeover in the drug industry that offset a grim warning about the year ahead from Caterpillar and worries over the state of the financial sector.
Japanese shares rose 4.9 percent overnight after Tokyo launched a $16.7 billion (11.7 billion pound) scheme on Tuesday to help firms threatened by the financial crisis.
Investors in the United Kingdom will watch CBI distributive trades data due out at 11 a.m. on Tuesday for more clues on the likely depth and length of the UK recession.
(Editing by Karen Foster)
LONDON (Reuters)
By 9:04 a.m., the FTSE 100 was down 7.52 points, or 0.2 percent, at 4,201.49 points.
A banks rally helped spur the FTSE index 3.9 percent higher in the previous session, when Barclays sky-rocketed more than 73 percent after saying it would not need fresh capital.
Barclays, which took a hammering over the past two weeks, surged 11.6 percent early on Tuesday. Royal Bank of Scotland jumped more than 15 percent, leading the FTSE gainers, and Lloyds Banking Group added 7 percent.
However analysts cautioned that the rally may not be sustainable.
"Concerns around the banking sector may dissipate a bit but they'll continue hovering in the background," said Peter Dixon, an economist at Commerzbank.
"For the next six months there is no upside," Dixon said. "People are shell shocked after the events of the last couple of weeks. It's as if people are used to watching the red on the screens now."
Energy shares Royal Dutch Shell and BG Group fell 1.3 and 1.5 percent, respectively, falling back from strong gains the day before. Crude oil rose to about $47 a barrel after falling overnight.
Topping the losers in London, plumbing and heating supplies group Wolseley fell 5 percent.
Wolseley stock fell about 30 percent on Monday, when it said its half-year profit would more than halve as housing markets continued to slow and it was hit by the recent weakness of the pound.
It was further pressured on Tuesday after RBS and Panmure cut its price target.
Real estate company British Land dropped 3.3 percent after Goldman Sachs put the stock on its "conviction sell" list. Liberty International , Segro and Land Securities also fell after Goldman cut its price targets on the stocks.
"The recent speed of deterioration in the UK commercial real estate market significantly increases the risks for a number of the UK REITs from simply sitting tight until the worst of the storm passes," Goldman said in the note.
FRIENDS REASSURING
Friends Provident jumped 6.3 percent after the life insurer reassured on its capital strength and said it was maintaining its dividend, as it reported an 11 percent decline in full-year sales, which was still ahead of analysts' forecasts.
Water company Severn Trent fell 5 percent after it said lower water use by businesses was likely to hit its annual revenues more than expected, although it said trading was otherwise meeting its hopes.
In the United States, stocks rose in choppy trade on Monday, lifted by optimism over a $68 billion takeover in the drug industry that offset a grim warning about the year ahead from Caterpillar and worries over the state of the financial sector.
Japanese shares rose 4.9 percent overnight after Tokyo launched a $16.7 billion (11.7 billion pound) scheme on Tuesday to help firms threatened by the financial crisis.
Investors in the United Kingdom will watch CBI distributive trades data due out at 11 a.m. on Tuesday for more clues on the likely depth and length of the UK recession.
(Editing by Karen Foster)
LONDON (Reuters)
