FTSE set for worst week since July

The index is down 2.5 percent on the week,with investor confidence dented by euro zone debt concerns,spreading political unrest in the Middle East and North Africa and economic worries in China and the United States.

* FTSE down 0.5 percent,set for worst week since July

* Insurers hit on Japan quake

* Banks wobble ahead of European Summit

London’s blue chips tested the 50 percent Fibonacci retracement level of 5,812,from the Nov. 30 low to the late February high.

Even though a slight recovery cannot be ruled out from the current level,its extent should be limited by the resistance at 5,980. A further decline is expected towards next support thresholds at 5,700 and 5,625. First resistance is set at 5,875,Nicolas Suiffet,analyst at Trading Central,said.

Life insurers such as Prudential,Aviva and Standard Life fell 1.2 to 2.2 percent,dragged down along with sentiment in the sector,after an 8.9 magnitude earthquake hit the northeast coast of Japan triggering a 10-metre tsunami.

At the moment this is just a kneejerk reaction within the sector … then people start focusing on exactly where the exposures lie,Joshua Raymond,market analyst at City Index,said.

Analysts said Lloyds of London insurers such as Catlin,down 3.9 percent,could be affected by the disaster.

BANKING SUMMIT

Banks which were lower on Thursday after Moody’s cut Spain’s credit rating,fell further ahead of a summit of European ministers.

German Chancellor Angela Merkel signaled to lawmakers in a closed-door meeting she was prepared to agree an increase in Europe’s rescue fund later this month,participants said,but only under conditions that other states may find difficult to accept.

UK real estate investment trusts were under pressure as Nomura cuts its rating across the sector on valuation grounds.

Land Securities,which Nomura cut to neutral from buy,peer British Land and Segro,which was cut to reduce from neutral,were all down around 1 percent.

Miners,however,rose with analysts saying they would benefit from demand for materials needed to help rebuild Japan,while the latest Chinese inflation report also pointed to signs that demand remained robust.

(Core) inflation pressures are moderating and in addition you have higher economic growth and therefore higher need for coal and other commodities,Gerard Lane,analyst at Shore Capital,said.

Demand for commodities will continue to rise more strongly than most people anticipate.

He said demand for coal was particularly good news for Xstrata up 0.5 percent,while the sector looked good value on 8 times prospective earnings,compared with around 10 times for the FTSE.

Accountancy software firm Sage gained 0.9 percent,helped by an upgrade from UBS.

On the economic front,British factory gate inflation rose to its highest annual rate in more than two years in February.