FTSE 100 sinks again over fears of Middle East unrest

POLITICAL turmoil in Libya and the threat of contagion across the Middle East and North Africa sent Britain’s leading shares lower yesterday, testing seven-month technical support levels.

The FTSE 100 index was 73.23 points, or 1.2 per cent, lower at 5,923.53, extending its declines to more than 2.5 per cent on the week.

London’s blue chips closed at their lowest level in over three weeks but just above the technical support level of 5,920 from July 2010, although it was breached earlier in the session at 5,915.52.

Energy and mining stocks were the sharpest fallers as governments around the world scrambled to evacuate their citizens from Libya, where leader Muammar Gaddafi has vowed to crush a revolt against his 41-year rule.

Gold miner Antofagasta lost 5.1 per cent, while copper-focused group Xstrata tumbled 4.4 per cent.

Investors speculated that the troubles could derail the global recovery, with crude oil prices hovering near multi-year highs, and gold over $1,400 (£864.23) an ounce as investors turned to the metal as a haven from risk.

“Geopolitical fears continue to grow rather than subside and as long as that occurs then the price of oil will continue to defy normal demand cycles,” Howard Wheeldon, strategist at BGC Partners, said.

“Once the imported inflation of the higher price of oil takes hold through virtually the whole of manufacturing and services then it acts as an unfortunate tax on the consumer.”

Beverage can maker Rexam was the heaviest FTSE 100 faller, down 5.8 per cent after posting full-year results.

“Company news has taken a back seat to a certain extent with one of the biggest fallers being can company Rexam, despite posting better than expected profits for 2010,” a trader said.

Technology stocks were also among the biggest decliners after Hewlett-Packard lowered its 2011 revenue outlook, citing weak consumer demand for its PCs.

Chip designer ARM fell 1.5 per cent, while the STOXX Europe 600 Technology index was down 1.8 per cent.

Banks retreated as investors took flight from risky equities, with Royal Bank of Scotland down 0.8 per cent ahead of results and Barclays also down 0.8 per cent as the stock traded ex-dividend.

The fall came despite an earlier US court ruling that Lehman Brothers’ hurried sale of US operations to Barclays at the height of the financial crisis was fair.

“This is a good decision for Barclays,” said Seymour Pierce in a research note.

Stocks seen as defensive were the other main FTSE 100 gainers, with utility Severn Trent up 0.1 per cent and Imperial Tobacco 0.5 per cent higher.

Oil services firm Amec was the top FTSE 100 riser, up 0.9 per cent, with traders citing a read-across from a bullish outlook statement by Australian peer Worley Parsons.

Property companies were also among the top performers, with Land Securities gaining 0.8 per cent and British Land outperforming the market to close 0.2 per cent off.

Outside the FTSE 100, music retailer HMV rose 5.95 per cent after a report that the firm was preparing for talks with its lenders.

Cable & Wireless Worldwide gained 6.7 per cent after it sold off its Bermuda business.