FTSE sinks to lowest level in a month as Fed’s statement makes investors nervous

BRITAIN’S FTSE 100 share index fell yesterday as fears over the sustainability of a global recovery hit commodity-linked stocks and banks as risk appetite waned. The FTSE 100 closed down 78.29 points, or 1.5 per cent at 5,100.23 points, its lowest closing level in almost a month after shedding 1.3 per cent on Wednesday.

A statement on Wednesday by the US Federal Reserve aroused negative sentiment after it scaled back its assessment of the pace of economic recovery, taking note of pockets of weakness, and also issued a cautionary note about volatile financial markets in the light of Europe’s sovereign debt woes.

Mining and energy stocks accounted for the biggest falls on the index as the cautious tone of the statement weighed on the demand outlook.

The world’s eighth-largest copper miner Kazakhmys was the top faller down 5.1 per cent, oil explorer Tullow Oil was down 4.1 per cent.

The Fed’s comments also heaped pressure on Eurozone finances.

Analysts said economic austerity measures like those announced by Britain’s finance minister, George Osborne, on Tuesday were adding to the gloom.

Banks were also depressed by worries for the economic recovery.

Royal Bank of Scotland fell 3.3 per cent while Barclays lost 4.6 per cent.

Stocks perceived as relatively immune to economic stagnation like supermarkets and utilities outperformed.

Morrison Supermarkets added 2.7 per cent, while National Grid gained 0.4 per cent.

Centrica was a top gainer, up 2.8 per cent after the gas distributor was added to JPMorgan Cazenove’s Analyst Focus list as its price target was increased.