FTSE hit by fears UK recovery will stall without fresh stimulus

BRITAIN’S top shares posted their biggest one-day losses in over two months yesterday, hit by market concerns that further quantitative easing measures in the US might be less aggressive than expected.

The FTSE 100 was down 61.28 points, or 1.1 per cent, at 5,646.02, its lowest closing level since 5 October, adding to the 0.8 per cent loss on Tuesday, with some traders fearing the start of a sizeable retracement.

“Given the recent gains and the difficulty the market had pushing through the 5,800 level, a pullback to around 5,400 looks increasingly likely in coming days," said Manoj Ladwa, senior trader at ETX Capital.

Mining and energy stocks were the worst performing blue chip sectors, falling along with commodities which came under pressure from investors worried that the US Federal Reserve might not feed markets with as much cheap cash to boost growth as they hoped.

Kazakh copper miner Kazakhmys dropped 5.0 per cent, while Xstrata fell 3.8 per cent after revising terms on its A$428m ($422m) takeover offer for Australia’s Sphere Minerals.

A survey this month found US primary dealers’ projections for the size of the Fed’s expected quantitative easing ranged from $500bn to $1.5 trillion.

“People expect QE2, and now they’re debating exactly what levels of QE2 we’re likely to see. I think there have been some murmurs around the $200bn mark which has disappointed a few people,” Joshua Raymond, market strategist at City Index, said.

Oil majors BP and BG Group were off 1.7 and 1.0 per cent respectively, with crude also easing.

Economic data from the world’s biggest economy only added to investors’ confusion over the extent of the Fed's QE programme.

Demand for long-lasting US manufactured goods, excluding aircraft, unexpectedly fell last month and a key gauge of business capital spending plans also eased, underscoring the economic recovery’s tepid pace.

British American Tobacco, the world’s second-biggest maker of cigarettes, slid 1.5 per cent after posting downbeat Q3 results.