LONDON MARKETS: London Stocks Weaken; Banks, Resources Off

By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- Banks and resource firms led U.K. stocks lower on Wednesday, tracking a downbeat mood across European bourses, while shares of United Utilities Group PLC bucked the trend after the firm reported earnings.

The FTSE 100 index dropped 0.4% to 5,779.34.

Shares of Bunzl PLC dropped 3.9%, after Citigroup cut the consumer-products firm's price target to  £11.90 from  £12.50 to reflect a new earnings forecast.

Resolution Ltd. shares slid 1.7%, after UBS cut the insurer to neutral from buy. The analysts said they expect the firm to miss its 2013 targets.

Bucking the negative trend in London, shares of United Utilities Group PLC added 1.9%, after the firm reported a rise in earnings per share for the six months to end Sept. 30 and said it's on track to meet its regulatory targets.

Most U.K. stocks were weighed by comments from U.S. Senate Majority Leader Harry Reid. The Nevada Democrat said late Tuesday that only little progress has been made in negotiations between Democrats and Republicans to avert the so-called fiscal cliff, slated to trigger automatic spending cuts and tax hikes in the new year.

The negative sentiment was prevalent among resource shares in London, as both oil prices and metals prices headed south.

Shares of heavyweight miner BHP Billiton PLC (BHP) dropped 1%, Fresnillo PLC lost 1% and shares of Rio Tinto PLC (RIO) tripped 0.4%.

Among oil firms, shares of Royal Dutch Shell PLC (RDSB) nudged 0.3% lower and BP PLC (BP) fell 0.2%.

Banks were also on the decline. Shares of Lloyds Banking Group PLC (LYG) gave up 1.3%, Royal Bank of Scotland Group PLC (RBS) fell 0.9% and sector heavyweight HSBC Holdings PLC (HBC) lost 0.3%.

Shares of Smith & Nephew PLC (SNN) gave up 1%. The health care firm said it agreed to buy the assets of Healthpoint Biotherapeutics, a wound-care-treatment developer, for $782 million in cash.

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