THE FTSE 100 share index hit a fresh three-month closing low yesterday, with some sectors seen vulnerable to further falls as the extent of the damage in Japan after the earthquake and tsunamis becomes clearer.
Luxury goods firms such as Burberry Group and insurers including Aviva and Catlin Group were among the top fallers as Japan faced the economic impact of a disaster that has killed thousands.
The FTSE 100 closed down 53.43 points, or 0.9 per cent, at 5,775.24. The blue-chip index has lost almost 200 points in the past four trading days with sentiment weighed on by violence in Libya, Eurozone debt worries and Japan.
British-listed insurers fell further with Aviva and Catlin each falling more than three per cent.
“The earthquake, tsunami and the aftershocks expected this week are likely to generate one of the largest reinsurance losses seen,” said Kevin Ryan, analyst at Investec Securities.
“If this happens, it will affect insurance and reinsurance pricing and it may affect equity markets.”
Fashion group Burberry shed 4.3 per cent as analysts said demand for luxury products would suffer in Japan.
“The market doesn’t forget and in 1995 following the Kobe earthquake, a smaller disaster compared to last Friday’s one, we must remember that the Nikkei lost over 20 per cent. As things stand we’ve lost nearly 10 per cent,” a trader said.
Temporary power generators provider Aggreko rose 8.2 per cent as demand for its services was seen coming from Japan. The firm said it was ready to equip Japan with some of its self-contained gas and diesel generators if asked.
Meanwhile gas firm BG Group was up 3.7 per cent. “Disruptions to nuclear power supply could see Japanese LNG (liquid natural gas) demand increase. This would reduce global LNG oversupply and support a recovery in European gas and power prices,” UBS said in a note.
BG Group signed a 20 year LNG sales deal with Tokyo Gas last week.
Away from Japan, strong sales of the second-generation iPad in its opening weekend boosted Imagination Technologies up 5.5 per cent. Its graphics chip is used in the popular tablet.
Lack of confidence among investors dogged the FTSE, which is also under pressure from technical indicators, which suggested that the index is vulnerable to further significant weakness.
The index was below 5,812, the 50 per cent Fibonacci retracement of the November low to the February high. The next support, a 61.8 per cent retracement is at 5,744.
Graham Secker, European equity strategist at Morgan Stanley, said the bank had moved to a more defensive stance, with telecoms looking particularly favourable, as he saw a peak in leading indicators being reached.
Risky assets such as banks, miners and integrated oils were all down as sectors.
Heavyweight Vodafone was a significant drag on the index, slipping 2.2 per cent after the Financial Times said European telecoms and entertainment group Vivendi is not willing to pay much more than £6bn for Vodafone’s stake in SFR.
Miner Vedanta rose 1.6 per cent after the Indian regulators said they had wrapped up an investigation into the firm’s $9.6bn (£5.9bn) purchase of some of Cairn’s assets, fuelling speculation that the acquisition will win approval.