FTSE 100 falters despite US stats giving a late lift

THE UK’S top share index fell yesterday due to weaker financials, but bounced off lows as growing optimism over the US economy largely offset concerns about the winding down of central bank stimulus.

The FTSE 100 closed down 3.84 points, or 0.1 per cent, at 6,303.94, having been down as much as 0.7 per cent before the US open.

US stocks rose for a second straight day as optimism grew over the economic outlook. Turnover of 73 per cent of the 90 day average left the blue-chip index vulnerable to price swings.

“There could still be potential weakness to come, and we could head back down to the 6,000 level. The market seems a little bit jittery, and we’re being dictated by how the Americans perform,” said Manoj Ladwa, head of trading at TJM Partners.

“If it gets through 6,400, we could have a decent run towards those highs again, but I think we may struggle.”

Traders cited caution ahead of important US jobs data due on Friday and a public holiday in the United States on Thursday as suppressing volumes.

Financials led the market lower, taking 4.6 points off the index and bearing the brunt of the other side of a more positive growth story in the United States; that the US Federal Reserve may slow its unprecedented stimulus programme.

Aberdeen Asset Management fell 2.3 per cent, taking its fall since Fed chairman Ben Bernanke first hinted that the central bank may reduce its purchases later this year to 22 per cent.

“If we’re going to be in a negative mode for the next few months, the asset managers won’t do well and will see wild swings, exaggerating market moves. But I think the market has got it wrong [on Fed tapering],” Joe Rundle, said, adding that he though policy would be more supportive than the British market was pricing in.

Political disruptions in countries as diverse as Turkey, South Africa, Egypt and Brazil have coincided with US economic strength which has raised the prospect of a slowing of its unprecedented stimulus programme, hurting more risky assets. Benefiting from strength in the United States was Serco, up 6.5 per cent after winning a contract worth $1.25bn from the US government.

Also topping the FTSE 100 gainers was Burberry, up 2.9 per cent, with traders citing an upgrade to the stock to “overweight” from “neutral” by HSBC.