London Report: FTSE investors rattled by Fed tapering fears

THE UK’S main share index fell in thin, choppy trade yesterday, led by a late selloff in travel operator Tui Travel and hit by concerns about a reduction of US monetary stimulus.

The FTSE 100 turned lower in late trade as US stocks retreated from recent highs, showing investors’ reluctance to put money back into the market until there is greater clarity on the Federal Reserve’s equity-friendly asset-purchase programme.

Several Fed members have backed the scaling-back of the scheme, which has helped the FTSE rise 16 per cent since it was announced in September 2012, as soon as next week’s meeting.

St Louis Federal Reserve Bank president James Bullard, who is sometimes seen as a bellwether for US monetary policy, unexpectedly voiced support on Monday for a “small taper”. Two of his colleagues, meanwhile, said the risks of continued super-easy monetary policy exceed the benefits.
The FTSE 100 closed 36.17 points lower, or 0.6 per cent, at 6,523.31 after hitting an intra-day high of 6,571.91 and a low of 6,519.00.

Volume on the index was 15 per cent lower than its average for the past three months, exacerbating share price moves.

The index was supported by a cluster of trendlines and Fibonacci retracements just below a nearly two-month low of 6,479 points hit last week.

“We’re seeing some very choppy trading and that shows people are not in the market right now,” said Joshua Raymond, a strategist at City Index.

“My honest sense is people are still wanting to buy back into this market but ... they need to see greater confidence that tapering is not going to happen until the end of the first quarter.”

Tui Travel was among the top FTSE fallers despite reporting strong results, as investors took profit on a nearly

11 per cent rally in the share since late November. The stock reversed early gains to close 1.5 per cent lower at 376.9p.

“People bought into it in the opening auction but as soon as it got to 396p-397p we had sell orders from people looking to lock in their profits,” said City Index’s Raymond, adding he expected the stock to head back up towards its all-time high at around 400 pence. A rally in insurer Prudential, up 1.7 per cent at 1,283p, helped the FTSE limit losses after the British-based life group set new growth objectives, driven by its Asian business.