FTSE: 5,222.60 (-140.34) Mid-250: 9767.88 (-276.48) Small Cap: 2,722.11 (-43.77)BRITAIN'S FTSE 100 slid to its lowest close in six weeks, with worries mounting over the health of the global economy as the US and Europe wrestled with their respective debt problems.
London’s blue chip index recorded its sixth straight day of losses and adding to the previous week’s drop of 3.3 per cent, with analysts warning of potential for further downside.
Not even a new government in Spain could soothe market fears over debt contagion within the euro zone.
Richard Jeffrey, chief investment officer at Cazenove Capital Management, which has £15 billion of assets under management, said that with rising yields a major concern, investors should keep a close eye on upcoming bond auctions. “The moment you have a failed bond auction the whole system begins to implode,” he said. “We may not get to that point. Heads may get knocked together hard enough and they might be sensible enough to say ‘We cannot get to that point’.”
Mining stocks, which have lost more than a quarter of their value in 2011, led the FTSE 100 lower again as the murky outlook for demand weighed on metals prices.
Adding to the grim forecasts, US plans to combat its debt were sent into disarray.
FTSE banks fell sharply, with Royal Bank of Scotland down 4.9 per cent after Espirito Santo cut its rating on the part state-owned lender to “neutral” from “buy”.
The broker said while RBS was regarded as one of the best recovery plays in the sector due to its depressed share price, it found little evidence of a recovery in earnings forecasts.
Worries remained over the leadership at Lloyds, down 7 per cent, after chief executive Antonio Horta-Osorio’s return from sick leave was delayed.
The depressed valuations of some corporates remained attractive to firms looking to boost their growth potential.
FTSE mid-cap life insurer Phoenix and small cap European publishing group Mecom gained up to 16 per cent after each said they were mulling over bids for their respective businesses.
Nomura said it remained upbeat longer term on global equities on valuation grounds, but scaled down its “overweight” position in Europe as the continuing uncertainty around the resolution of the crisis could lead to more volatility. – (Reuters)
