Week of gains set back by S&P UK outlook downgrade
A CUT in the UK’s ratings outlook from agency Standard & Poor’s weighed on the FTSE 100 yesterday, with weakness in heavyweight oils, miners and banks contributing to a 2.8 per cent slide by close of play.
The index ended 122.94 points lower at 4,345.47, its biggest daily fall since 27 March, having closed 13.84 points lower on Wednesday.
“The potential downgrade (from S&P) has given an excuse for investors to sell after the recent sharp gains,” said Grahame Exton, fund manager at Tilney Investment Management. “Investors are realising it won’t be the V-shaped recovery that they were pricing in.”
The extent of the economic gloom for the UK’s finances was reinforced by data showing public borrowing hit a record high for an April since records began in 1984.
Banks weighed heaviest, with HSBC, Royal Bank of Scotland, Barclays, Standard Chartered and Lloyds Banking Group shedding 3.1 to 5.9 per cent.
Oil majors fell back as crude weakened, with Royal Dutch Shell, BP, BG Group and Cairn Energy down between 1.8 and 2.9 per cent.
Miners retreated with lower metal prices, led by Kazakhmys and Eurasian Natural Resources down 6.6 and 7.4 per cent respectively, while BHP Billiton, Xstrata and Rio Tinto fell 5 to 9.6 per cent.
Property group British Land slid 6.4 per cent after it saw its full-year net asset value tumble 64 per cent to 398p a share, below the average forecast of 423.6p
Other real estate stocks suffered as well, with Land Securities, Hammerson and Liberty International losing 6.6 to 8.2 per cent.
ICAP shed 9.1 per cent, extending the previous session’s sell-off following confirmation after the market close on Wednesday that the firm’s founder and chief executive, Michael Spencer, had sold a chunk of shares in the inter-dealer broker.
Mobile telephone giant Vodafone slid 4.3 per cent after Nomura cut the stock to “reduce” from “buy”, UBS removed it from its “most preferred” list and Deutsche Bank cut its price target on the stock.
There were just five blue chip risers with Capita, Unilever, Glaxosmithkline, Astrazeneca, Tullow and Lonmin up between 0.4 and 3.6 per cent.
Investors will watch the second release of first quarter GDP data today for more insight on the ferocity of the headwinds facing the UK economy.