WEAK banks and commodity stocks sent Britain’s top shares to a more than two-week closing low yesterday after an inconclusive election result in Italy revived Eurozone debt crisis concerns.
Europe’s most indebted state faced a political vacuum after a huge protest vote left no party or likely coalition with enough seats to form a majority in Italy’s upper house.
The FTSE 100 ended down 84.93 points, or 1.3 per cent, at 6,270.44, its lowest close since 8 February. Some strategists, however, reckoned any losses would be short-lived.
“It’ll be a relative blip, one would suspect,” Henk Potts, market strategist at Barclays, said. “The European sovereign debt perspective looks an awful lot better given the work done and the initiatives implemented from the European Central Bank; the long term refinancing operations, OMT (Outright Monetary Transactions), the work of the European Stability Mechanism.”
And with the index still well above a low of 6,216.72 hit on 7 February the bottom of a range in place over the past four weeks, the technical picture did not look so bleak.
“Until you see the FTSE drop below that level, it’s going to be possible to argue that it’s moved into a choppy phase,” said Bill McNamara, technical analyst at Charles Stanley.
GFT Markets technical analyst Fawad Razaqzada, meanwhile, said: “It’s worth remembering that we are still in a long-term bull market. Therefore, I don’t expect to see a huge pullback.”
Banks, among the most exposed to the Eurozone crisis through corporate and public debt, knocked around 15 points off the index yesterday.
With the outcome of Italy’s election also clouding the outlook for the global economy, commodity-related stocks looked shaky too, exerting downward pressure on the index to the tune of around 23 points.
Britain’s biggest hotel and coffee shop operator, Whitbread, shed 3.7 per cent after it saw a slowdown in fourth-quarter sales.
Panmure Gordon repeated its “hold” rating on Whitbread, with the broker cautious on current trading and the increasingly competitive environment for budget hotels.
Randgold Resources bucked the weak market trend, ahead 2.6 per cent, as investors turned to the gold miner as a proxy for the safe-haven precious metal.
Car and plane parts maker GKN was another significant gainer as it beat forecasts with a 19 per cent rise in 2012 pretax profit, helped by demand for luxury cars in China, the world's biggest autos market.
Its shares jumped 3.6 per cent, topping the FTSE 100 leader board, while chemical maker Croda firmed 1.1 per cent after it revealed a profit rise.