BRITAIN’S FTSE 100 fell again yesterday, heading for its longest run of weekly drops since 2008, led by a sell-off in engineering and retail sectors and rattled by concerns about an imminent scaling back of US monetary stimulus.
Sports Direct led falling stocks, down 12.6 per cent in its biggest one-day drop for over two years, after disappointing investors by reaffirming rather than upgrading its full-year targets.
The news hit shares in Britain’s biggest sporting goods retailer, which had been among the most expensive in the FTSE 100 – trading on 30 times current earnings, compared with the index average price/earnings (P/E) ratio of around 16.
“There was quite a lot of outperformance in the first half and management have suggested that trading has reverted back to its original expectations,” said Guy Stephens, managing director at investment managers Rowan Dartington Signature.
“It’s a bit of a reality check, but we don’t see it as anything more than that ... We see that as an entry point if you can swallow the P/E.”
Also among the top losers, engineers Amec and Petrofac sold off after a profit warning from mid-cap peer Wood Group.
“That whole sector is really suffering. The big oil companies are starting to focus back on their return on equity and reducing capex in certain areas, so... the people that are suffering are those that feed off those big companies,” said Paul Kavanagh, partner at Killik & Co. “When Wood Group are guiding 15 per cent lower, there is scope for further earnings disappointment in the sector.”
Shares in Wood Group dropped 10.8 per cent, while Amec and Petrofac were down five and four per cent, respectively.
The weakness in engineers and retailers meant the FTSE 100 lagged behind its European peers, with the British index closing down 62.47 points or one per cent at 6,445.25 points while the Eurozone’s EuroStoxx 50 lost 0.6 per cent.
FTSE 100 companies make around a quarter of their revenues in the US, and have been worse hit than indexes with lower US exposure, such as the German Dax or the French Cac. The recent weakness of the FTSE has also been exacerbated by the pound, which hit a two-year high against the dollar this week, eating into the revenues of British exporters.