London Report: Aberdeen drags down FTSE as downgrade hits

THE UK’S top share index was led lower by Aberdeen Asset Management yesterday but stayed in the tight trading range set over the previous week as many traders opted to wait for a steer on US monetary policy.

The blue-chip FTSE 100 closed down 0.2 per cent, or 11.35 points, at 6,558.82 points – towards the lower end of the day’s range but within the roughly 100 point open/close range the index has traded since 10 September.

Keeping sentiment in check throughout the day was an impending meeting of the US Federal Reserve, which is widely expected to reduce its $85bn in monthly asset purchases – polls suggest by $10bn – after UK markets close.

“The overall market reaction is likely to be muted if the Fed tapers by an amount that is within the $10bn to $20bn range,” said Abi Oladimeji, head of investment strategy at UK firm Thomas Miller Investment.

“When all is said and done, it is the case that monetary policy remains relatively loose and broadly supportive of risk assets.”

Given what was in the price, it would take a scaling back of $25bn to be “market negative”, a London-based trader at a US investment bank said, “but recent data would argue against that”.

Of more importance, he added, will be what the bank says about its plans to normalise monetary policy still further in the coming months.

The easy money policy of the Fed and other central banks has been a key plank of the support for equity markets globally and contributed to a 11 per cent year-to-date gain for the FTSE 100.

Leading fallers across the broader index in volume two times its 90-day daily average was fund management company Aberdeen AM, which fell 3.5 per cent after investment bank Morgan Stanley cut its price target on the stock, traders said.

The bank cut its earnings per share forecasts on the company by six per cent and reduced its target price to 407p from 435p. Aberdeen closed at 364p.

Among the most in-demand stocks to buy, meanwhile, was hi-tech engineering company Smiths Group, which rose 2.6 per cent after surprised markets with a special dividend.

“The FY13 results appear broadly in-line with expectations, but there is a special dividend of 30p that is likely to be well-received,” analysts at Jefferies said in a note.