By Sudip Kar-Gupta
LONDON (Reuters) - Britain's top equity index fell on Wednesday to hover around a one-month low as heightened concerns over the credit market in China, the world's top metals consumer, hit the mining sector for the fourth straight session.
The blue-chip FTSE 100 index, which had already fallen in the last three sessions, was down by 0.7 percent, or 48.78 points, at 6,636.84 points in early session trading.
A host of companies, including major banks HSBC and Standard Chartered went ex-dividend on Wednesday.
Investors who buy a stock on or after its ex-dividend date are not entitled to the dividend payment, and the companies going ex-dividend had the technical impact of taking some 20 points off the FTSE 100 index.
However, a fall in mining stocks also weighed on the market, with the FTSE 350 Mining Index declining for the fourth day in a row to trade 1.1 percent lower.
The sector was hit after the price of Shanghai copper fell by its five percent daily limit while the price of London copper hit a 44-month low on growing concerns about credit-linked defaults in China.
A bond default last week by a Chinese solar company reignited concerns about a possible economic slowdown in China, which in turn has hit metal prices and mining stocks.
"China steel rebar prices have reached new lows. We see this data as a reliable indicator of a potential softening in underlying demand for steel in China," Morgan Stanley analysts wrote in a research note.
The FTSE 100 rose 14.4 percent in 2013 to record its best annual gain since 2009. It also reached peaks that marked its highest level in around 13 years in early January this year and in late May 2013 that were in the 6,867-6,875 point range.
Although the UK stock market has been propped up by a gradual recovery in the British economy, some traders expected the FTSE to remain under pressure in the near-term, with the index down 1.6 percent since the start of 2014.
"It looks like this correction is set to continue," said Hantec Markets analyst Richard Perry, who said the FTSE could fall below the 6,600 point if it broke below the 6,608 point level, which marked an intraday low in February.
(Editing by Toby Chopra)