BRITAIN’S top share index fell yesterday reflecting investor uncertainty over whether this week’s key European Central Bank (ECB) meeting will deliver the goods on a hoped for bond-buying scheme designed to ease the euro debt crisis.
The FTSE 100 closed down 86.40 points, or 1.5 per cent, at 5,672.01, ending back below the 5,700 level for the first time since 2 August.
After rallying on Monday on hopes for stimulus measures from tomorrow’s ECB meeting, yesterday some commentators questioned whether the bank would have anything specific to announce.
“It...seems more and more likely that the highly anticipated ECB conference will once again turn into a description of the Eurozone debt crisis rather than identifying ways to solve the crisis,” said Shavaz Dhalla, financial trader at Spreadex.
The gloomy American figures also knocked stocks in Europe. The FTSEurofirst 300 ended down 1.1 per cent at 1,079.12, albeit in thin trading volume of just 62 per cent of the 90-day daily average.
“If the ECB disappoints, the reaction would be on the negative side. But I don’t expect a dramatic sell-off as focus will shift to other events,” said Christian Stocker, equity strategist at UniCredit.
Such uncertainties hurt heavyweight, risk sensitive sectors such as energy, miners and banks, which were the top sector fallers having led the low volume FTSE 100 rally on Monday.
Telecoms titan Vodafone was the biggest individual drag on blue chip sentiment, accounting for over 10 per cent of the index’s decline with a 2.6 per cent fall, after Bernstein Research downgraded its rating for the mobile telecoms company.
Chipmaker ARM Holdings was the biggest percentage faller, dropping 5.6 per cent after a rating downgrade from Deutsche Bank.
However, some saw a chance of bullish news from the ECB.
“We see support at 5,635 in the short term and 5,700 and 5,680 held intra day, but now we look for a retest of these highs and could see these tested on positive news from Europe,” said Atif Latif, a director of Guardian Stockbrokers.
“Many of the technical indicators still suggest that we will bounce from these lows in the short term given the belief that Central Bank action will suffice in preventing the selling we have seen,” Latif added.
Weakness in US stocks following some downbeat economic data also took its toll on London shares yesterday.
The market returned from Monday’s Labor Day holiday to weak ISM manufacturing and construction spending data that raised fresh concerns over the state of the US economy.
As the losses mounted up in London in the afternoon, there were just three blue chip risers left by the close.
Wm Morrison Supermarkets was the best off, up 0.3 per cent, rallying following falls on Monday in reaction to a Nomura downgrade, with the food retailer due to post first-half results tomorrow.
Petrofac was also up, by 0.1 per cent, after Credit Suisse upgraded its rating for the oil services group to “outperform” from “neutral” with an increased target price of 1,800p.
Diageo was the third riser, gaining just 0.17 per cent.
Meanwhile Xstrata and Glencore continued their drift downwards ahead of Friday’s shareholder vote on their merger plans, losing 3.1 per cent and 0.8 per cent respectively.