FTSE falters as Vodafone and Amec see falls
BENCHMARK share index fell from five-year highs, hit by weakness at telecoms group Vodafone and engineer AMEC, although many traders stayed positive on equities for the longer term.
The blue-chip FTSE 100 index, which touched a five-year intraday high on Wednesday, closed down 0.5 per cent, or 31.75 points lower, at 6,327.36 yesterday.
Some traders said the FTSE’s rally, which has seen the index rise some 7 percent since the start of 2013, could soon lose momentum on lingering signs of a weak global economy, with data yesterday showing a contraction in the euro zone economy.
Berkeley Futures associate director Richard Griffiths said the FTSE 100 could fall 200 points over the next month, but others expected it to maintain an upwards path, on hopes of a gradual global economic recovery that should support equities.
“People generally want to see the market go higher. They want to see the FTSE attacking 6,400 points,” said Mike Mason, senior trader at Sucden Financial Private Clients.
Mason said the FTSE would continue to attract money since equities had better returns than cash or benchmark government bonds, where returns have been hit as central banks have kept interest rates at record lows to try and boost the economy.
Colin McLean, managing director at SVM Asset Management, said many investors were still looking to use any market weakness to buy equities for relatively cheap prices.
“There’s plenty of cash to buy the dips, which should prevent any fall from being a material one,” he said.
McLean said his firm had recently added to positions in the industrials sector and remained ‘overweight’ on UK financial stocks, on expectations the global economy would recover as 2013 progressed, which in turn should boost those stocks and equities in general.
A 2.4 per cent fall at Vodafone took the most points off the FTSE. Vodafone was hit by concerns over weakness in its southern European business and the possibility it might be lining up a pricey bid for Germany’s Kabel Deutschland.
AMEC slumped 7.3 per cent to make it the worst-performing FTSE 100 stock, after the company’s cautious outlook disappointed some investors.
“Margin guidance looks disappointing so forecasts will come back a little,” Liberum Capital analysts wrote in a research note. Darren Easton, director of trading at Logic Investments, said he would hold “short” positions to bet on a future fall in the FTSE 100, down to around the 6,325 point level. “We could easily test 6,250 points. The market is looking for an excuse to sell off in the near term,” he said.