THE UK’s top share index retreated from a key technical level yesterday, with bank stocks hammered after being hit by a downgrade from credit rating agency Fitch just a week after rival Moody’s.
Barclays fell 7.4 per cent, while RBS closed 6.4 per cent lower and Lloyds lost 5.5 per cent.
Trade data from China also revived concerns about weak economic growth, which hit heavy-weight mining stocks. China reported that its trade surplus narrowed in September for a second month in a row as growth in exports and imports both came in below forecasts.
The International Monetary Fund warned that near-term risks to Asia’s economies are “decidedly” rising, while a Reuters poll found that stagnation is probably the best many of the world’s biggest developed economies can hope for over the next year.
The dim view of global growth was the catalyst for investors to cut their positions in the mining sector, which had run up almost 20 per cent of gains in the last seven trading days.
Even Rio Tinto wasn’t spared in the broad-based sell-off, falling 2.3 per cent despite a bullish quarterly update and outlook statement.
Anglo American fell almost 4.7 per cent as analysts said if Chilean state copper giant Codelco exercised an option to buy a 49 per cent stake in Anglo American Sur, it could stunt the miner’s growth strategy.
There could be more reaction from miners today after the release of Chinese inflation data, which will be used to gauge the likely next steps for Chinese monetary policy. The main driver for stock gains over the previous week has been attributed to Eurozone politicians making more positive comments about shoring up the region’s battered banking sector and solving the debt crisis.
“The hot air that has lifted these markets of late, based largely on more sustained confidence in our Eurozone leaders executing a plan is quite bewildering,” said Mike McCudden at Interactive Investor.