Fears over pace of economic recovery see FTSE stumble
THE FTSE 100 fell 1.5 per cent by the close yesterday with mining, oil and banking stocks leading the losers, as global markets retracted amid concerns over the pace of global recovery.
The index closed 68.96 points lower at 4,645.01, extending losses from Friday when it shed 0.9 per cent and marking its biggest one day percentage loss since 2 July.
“The markets have been overdue a correction. They have run away with themselves, ignoring the basis of what was really going on,” said Howard Wheeldon, strategist and BGC Partners.
“Recessions do not end in a day, a week or a few weeks, they take years and the process hasn’t run its full course yet.”
Miners fell as traders banked profits on the sector which has been at the forefront of the index’s recovery, as falling metals prices, due to worries over economic recovery, added to the sector’s woes.
Kazakhmys, Antofagasta and Lonmin were down between 3.7 per cent and 4.2 per cent.
The China Iron and Steel Association (CISA) said it would negotiate with the three top iron ore miners using a price it agreed with Australian miner Fortescue Metals Group as a reference.
However, Australia’s largest miner Rio Tinto, which is due to report its half-year figures on Thursday, said it does not see a price pact between Fortescue Metals and China’s largest steelmaker Baosteel as establishing an industry-wide price. Rio was down 4.7 per cent.
Anglo American and Xstrata were the top fallers, down 5.6 and 5.5 per cent respectively, amid talk that Xstrata had redoubled its attempt to win over the investors of its rival and merger-target Anglo American.
Fresnillo shed 0.3 per cent after the world’s largest primary silver producer posted a 14 per cent decline in first-half profit due to lower silver prices.
Banks were also lower as investors cut back on risky positions. HSBC, Lloyds Banking Group, Barclays and Standard Chartered were down between 1.9 and 4.5 per cent.
Royal Bank of Scotland shed 2.7 per cent after the lender said the Financial Services Authority has launched a supervisory review of the Scottish bank’s takeover of ABN Amro.
Oils dropped as crude headed south toward $65 a barrel, with Cairn Energy, BG Group, BP and Royal Dutch Shell down between 0.5 and 3.6 per cent.
There were few risers on the index but perceived defensive pharmaceutical stocks Shire, up 2.2 per cent, and GlaxoSmithKline, up 0.8 per cent, attracted investors shying away from riskier issues.
Life insurers Aviva and Legal and General added 1.6 and 2 per cent respectively, with the former benefiting after HSBC upgraded the insurer to “neutral” from “underweight” and raised its price target.
More economic data comes today in the form of the latest set of retail sales and CPI data, plus the US Price Producers index.