FTSE 100 sags, earnings outlook in focus

* FTSE 100 down 0.8 percent

* Cookson, Michael Page warn on profits

* Miners sag as World Bank cuts Asia growth

* BAE, EADS tie-up faces more hurdles

LONDON, Oct 8 (Reuters) - Britain's top share index fell

early on Monday, exhibiting weakness after gains in the previous

session and overnight falls in Asia, with some caution building

among investors ahead of the start of the new earnings season.

By 0741 GMT, the FTSE 100 was down 48.68 points, or

0.8 percent at 5,822.34, erasing Friday's gains with concerns

over the third-quarter earnings season, which begins in earnest

in the United States on Tuesday, mounting after a batch of

downbeat updates set the tone for the market.

"(The fall) is likely to reflect a degree of caution ahead

of the looming Q3 reporting season," Ian Williams, equity

strategist at Peel Hunt, said.

"There is understandable bottom-up caution from corporate

managements who may still be suffering from a lack of

visibility, which could just cap the near-term upside in equity

indices."

Cookson Group, which makes products for the global

steel industry, and recruiter Michael Page on Monday

became the latest UK firms to issue profit warnings. Cookson

fell 14.4 percent while Michael Page shed 5.4 percent.

Mid-cap news retailer WH Smith is the most shorted

stock in Europe announcing earnings with 7.1 percent of its

shares on loan, according to data explorers.

Promises by central banks in Europe and the United States to

provide economic stimulus continue to provide a back stop for

equity markets and prevents a radical retracement of a rally

that began in early June.

The gains for equities in tandem with weak earnings in the

previous quarter has left the FTSE 100 trading on a 12-month

forward price-to-earnings of around 11.5 times - near post

credit crisis highs.

But the economic backdrop remains murky with high

unemployment in the world's biggest economy, the United States,

while the World Bank cut growth forecasts for the East Asia and

Pacific region and said there was a risk the slowdown in China

could get worse and last longer than expected.

UBS analysts said in a note that while PEs are not expensive

versus a long run average of over 13 times, no one believes

consensus 2013 earnings per share growth of 12.5 percent.

"It seems that no one trusts the PE. We look to Q3 reporting

season/outlook statements to focus the mind on something

realistic for 2013," the bank said.

With the cut in forecasts from the world bank, lack of faith

in valuations and Cookson's update reverberating around the

market, miners, which trade on 11 times PE, were

the major fallers on London's blue chip index.

Global miner BHP Billiton shed 2.0 percent.

With risk appetite among investors subdued banks

and integrated oils also retreated.

Elsewhere there was more uncertainty for BAE Systems

as the saga surrounding its proposed tie-up with French

peer EADS rumbled on after the largest shareholder in

BAE issued a long list of objections to the group's proposed $45

billion merger.

(Written by David Brett)

Source: http://news.yahoo.com/ftse-100-sags-earnings-outlook-focus-075346632--business.html

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