LONDON’S top shares closed lower yesterday as downbeat company earnings and mixed global economic data triggered the sharpest one-day fall on the FTSE 100 since mid-November.
Earnings were in focus after updates from British oil heavyweight Royal Dutch Shell and drugmaker AstraZeneca, and Facebook in the United States, disappointed.
Shell alone took 16 points off the blue chip FTSE 100 index after its fourth quarter profit came in nearly $400m short of expectations.
The FTSE closed down 46.23 points, or 0.7 per cent at 6,276.88, edging away from mid-May 2008 highs of 6,376.
AstraZeneca shed 3.1 per cent after warning of a tough year ahead, while in the United States social network Facebook fell 3.8 per cent after its growth trailed the more aggressive estimates.
Temporary power provider Aggreko took its losses over the last five trading days to more than 11 per cent, with traders citing recent press speculation about the potential for another warning on earnings when it reports in March.
British banks meanwhile face another round of compensation claims that could total billions of pounds after the regulator found they had widely mis-sold complex interest-rate hedging products to small businesses. Royal Bank of Scotland shed 1.1 per cent following the finding.
Retailer Kingfisher fell 1.5 per cent after Nomura cut its target price and earnings estimates by 6 per cent on the firm as it took a more pessimistic view of the UK market.
Recent results have put a dampener on investor optimism, which helped push markets up towards four-and-a-half year highs.
While 70 per cent of European companies have so far beaten or met earnings estimates in the current reporting season, top analysts still expect fourth-quarter growth to fall 8.8 per cent year-on-year.
After rallying six per cent in January, Shore Capital strategist Gerard Lane said the FTSE looked “way too high given the near-term risks to earnings and the US fiscal worries”.
“However, I still think the FTSE 100 will see 7,000 by the year-end and if you are a smart investor you invest for the 7,000 now rather than wait for a correction that might never happen,” he added.
Investors greeted BSkyB’s offer to show its popular sports channels online for a daily fee with enthusiasm, pushing the shares up 1.0 per cent.
The company is seeking new customers to offset slowing growth at its core pay-TV service given sluggish consumer spending.
Diageo was a top riser, up 1.3 per cent after the world’s biggest spirits group ended talks to buy a stake in top-selling tequila brand Jose Cuervo.