THE FTSE 100’s eight-day winning streak came to a halt yesterday as worries over debt contagion in Europe and the demand outlook in China hit banking and commodity stocks.
The top share index closed 21.11 points or 0.4 per cent lower at 6,002.92, having risen more than six per cent in the previous eight sessions – its longest winning run in almost two years.
Bill McNamara, technical analyst at Charles Stanley, said the FTSE was probably due a minor pullback, although that did not necessarily mean the rally was over, especially with the FTSE holding above 5,950.
Royal Bank of Scotland and Barclays topped the list of blue chip fallers and a weak banking sector, down 3.4 and 3.8 per cent respectively, after ratings agency Moody’s cut Portugal’s debt to junk status.
“Today’s meeting of French and German banks in Paris is unlikely to assuage market concerns of a further ratings downgrade on other peripheral nations amidst concern about how debt rollovers might be treated by the ratings companies,” a London-based trader said.
Miners, however, were strewn across the list of FTSE fallers after China said it would raise benchmark interest rates by 25 basis points from today.
The third rate rise this year left investors wondering if the country’s government may be tightening too quickly amid signs growth is already starting to slow.
Heavyweight Vodafone shed 0.9 per cent on European Union plans to make it easier for retailers such as Tesco to compete with dedicated telecoms network operators.
The move comes as the EU proposes a cap on regulated wholesale prices for roaming services that will fall drastically over a three-year period.
BP slid 0.9 per cent, leading integrated oil stocks lower. Traders cited concerns the oil major may lower its earnings forecasts.
BP is scheduled to publish its results on 26 July.
BSkyB was down 2.1 per cent with traders pointing to concerns News Corp’s deal for the satellite broadcaster could be delayed, as new phone-hacking allegations pile pressure on Rupert Murdoch’s global media empire.
Among the smaller cap companies, media rival Trinity Mirror soared 16.6 per cent as analysts speculated that the firm could be the main beneficiary of any advertising boycott against News Corp brands.
WPP, the world’s largest advertising group by revenue, shed 3.1 per cent as Morgan Stanley cut its rating.
On the upside, Serco rose 3.9 per cent after BofA-Merrill Lynch raised its earnings forecasts and said its growth potential was being undervalued by the market.
Experian added 1.5 per cent as Citigroup upgraded its rating on the credit checking agency and raised its forecasts, while assuaging investor concerns over its Brazilian business Serasa.
Smith & Nephew gained 1.7 per cent, echoing a rise in US woundcare rival Kinetic Concepts, with traders citing vague private equity bid talk as a catalyst.
Outside the top flight, property firm and takeover target DTZ fell almost seven per cent after a disappointing trading update.
Axis-Shield, a healthcare products group, was the top riser in the FTSE indices after soaring 49 per cent on the back of a takeover offer.