FTSE hits three-week low on poor U.S. growth data, focus on Fed

By Atul Prakash LONDON (Reuters) - The FTSE slipped to a three-week low on Wednesday as a slowing U.S. economy and caution before the end of a Federal Reserve policy meeting led some investors to take profits from recent highs. The U.S. reported its economy grew in the first quarter at just a 0.2 percent annual rate, well below expectations for 1 percent growth and the fourth quarter's 2.2 percent growth. "The disappointing GDP headline seems to be the pretext used by equity investors to take some profits," said Tristan Abet, cross-asset strategist at Louis Capital Markets. "The malaise is well known: equity indices have gone well ahead of the reality. A pull-back is simply a 'normal event'." Investors also were waiting for a statement from the Fed, due after the UK market closes. The U.S. central bank has kept rates near zero since late 2008 to spur recovery from the financial crisis. "Investors are cautious before the outcome of the Fed’s policy meeting and will scrutinise the Fed statement for hints about the timing of the first rate hike in the United States," said Robert Parkes, equity strategist at HSBC Global Research. The FTSE 100 index closed 1.2 percent lower at 6,946.28 points after falling to 6,945.56, the lowest since early April and further away from Monday's record high of 7,122.74 points. The index is still up around 6 percent so far this year, but it has underperformed regional peers such as Germany's DAX, up nearly 20 percent this year, amid certainty about the result of a UK election on May 7. Traders said the UK stock market was likely to stay choppy until the election, when a drop in British consumer confidence may work against Prime Minister David Cameron. Among top sectoral decliners, the UK mining index fell 1 percent. Antofagasta dropped 2.2 percent after cutting its copper output forecast. Barclays dropped 1.7 percent after setting aside another 800 million pounds ($1.2 billion) to cover potential settlements for foreign exchange manipulation. Shares in British American Tobacco, the world's second-largest cigarette maker, fell 2.2 percent after reporting a drop in revenue for the first quarter. It was hurt by the strength of the pound and a continued decline in the number of people who smoke. Next, Britain's second-biggest clothing retailer, rose 1.7 percent as it maintained its profit forecast after posting first-quarter sales slightly ahead of its own guidance. (Additional reporting by Alexandre Boksenbaum-Granier; Editing by Larry King)