BRITAIN’S top shares index hit a seven-week closing low yesterday, led lower by energy stocks on worries slower US growth would crimp demand for crude while Commerzbank’s funding concerns hit Royal Bank of Scotland and Lloyds Banking Group.
The US economy grew more slowly than previously expected in the third quarter, and the news hurt UK-listed oil and gas shares, which fell one per cent.
RBS and Lloyds weighed on the market, down 5.8 per cent and 4.4 per cent respectively, with traders citing concerns that the two banks may need to raise more funds after sources said Germany’s Commerzbank may need €5bn more capital.
“The lack of management at the top is really a concern for Lloyds. Commerzbank’s comments this morning obviously undermined the weaker of the banks, such as those depended on funding. Lloyds does need a lot of funding,” said Jawaid Afsar, trader at Securequity.
Apart from slower US growth, mounting concerns over the Eurozone sovereign debt crisis and the downbeat corporate outlook also added to investors’ concerns.
FTSE 250-listed Thomas Cook lost three quarters of its value after the tour operator said it had initiated fresh talks with its banks after a further deterioration in its trading performance and cash position left it in danger of defaulting on the terms of its borrowing.
Peer TUI Travel shed 9.2 per cent. British Airways parent IAG also fell 5.2 per cent, on the back of both Thomas Cook’s woes and looming strike action at stablemate Iberia.
Big Yellow and Intermediate Capital rose by 9.8 and 9.1 per cent respectively on strong results.
The FTSE 100 fell for the seventh straight session yesterday and closed down 15.78 points, or 0.3 per cent, at 5,206.82, after trading as high as 5,281.95. The UK benchmark has lost nearly 12 per cent this year on worries over slower global growth and the Eurozone debt turmoil.
Growing concerns over the currency bloc’s debt problems have increased volatility in the FTSE 100 since August, as traders did not want to hold their position for too long for fears of being caught out.
Daily swings in the UK benchmark exceeded 2.5 per cent for more than half of the 80 trading sessions since the beginning of August.
However, there were only two such volatile trading days in the first seven months of the year.
“I always go home neutral. I can play things intraday, but I wouldn’t know what tomorrow’s going to bring. I have no clue and I think a lot of people are doing the same,” a London-based trader said.
The FTSE 100 volatility index, which tends to move inversely to the UK blue-chip index, fell to below 30 per cent though pretty much trapped in a range since November, while the Euro STOXX 50 volatility index eased to just below 40 per cent yesterday.
Since the start of August, daily swings in Euro STOXX 50, the Eurozone’s blue chip index, exceeded 2.5 per cent for 65 out of the 80 trading days. That compared with 34 trading days for the US’s S&P 500 and just seven for Japan’s Nikkei average.