Investors drop equities on continued Japan worries

HEIGHTENED fears about the nuclear crisis in Japan saw investors shun equities yesterday, with falls by heavyweight commodity issues dragging Britain's top share index lower.

Banks were the biggest fallers, however, also under pressure as a downgrade of Portugal's credit rating by Moody’s further unnerved investors.

At the close, the FTSE 100 was down 97.05 points, or 1.7 per cent at 5,598.23, dropping after a brief rally back above 5,700 earlier in the session was snuffed out.

“We are now getting in to the realms of selling the rally rather than buying the dips,” said David Morrison, market strategist at GFT Global.

The blue chip index ended down for a sixth consecutive session, taking its total fall over that period to 6.3 percent. “We have now scythed through some pretty significant support levels which we need to rally and recapture very quickly or else we are talking about a pretty sizeable breakdown in the market structure,” GFT’s Morrison added.

“With the markets being dealt heavy blows from events in Europe, Japan, and North Africa, market sentiment seems down for the count – and it’s difficult to predict where a second wind will come from,” said IG Index head of research Anthony Grech.

Japan’s nuclear crisis appeared to be spinning out of control yesterday after workers withdrew briefly from a stricken power plant because of surging radiation levels and a helicopter failed to drop water on the most troubled reactor.

Investors were spooked by comment from Europe’s energy chief that warned of a further catastrophe at the Japanese site in the coming hours, although his spokeswoman said he had no specific or privileged information on the situation.

Weak banks took the most points off the index after Moody’s overnight cut Portugal’s sovereign debt rating by two notches and said it may have to downgrade again.

Global lender HSBC shed 3.6 per cent, with the stock trading ex-dividend together with insurer Standard Life and real estate investment trust Land Securities.

Rising oil prices also knocked sentiment, with Brent crude futures up over $2 to to $110.75 a barrel on the Japan fears and renewed concern over unrest in the Middle East.

Bahrainis were warned by officials to avoid gathering in public areas for their own safety, while demonstrations in Yemen and Syria were violently dispersed by security forces.

International Consolidated Airlines Group was a big blue chip faller on increasing fuel costs and the uncertainty caused by the situation in Japan, losing 3.5 per cent.

Associated British Foods, however, bucked the weaker market trend, adding one per cent after Credit Suisse lifted its rating on the food producer and retailing group to “outperform” from “neutral”, citing the benefits of high sugar prices.

Richard Curr, head of dealing at CFD specialists Prime Markets said AB Foods shares have been significantly oversold.

“We expect the slack in the share price to be taken up, and for AB Foods to push back through 1,000p in the next 7-10 days,” he said.

The latest UK labour market data proved mixed on Wednesday.

The number of Britons claiming jobless benefit in February fell at its fastest pace since June, but a broader measure of unemployment rose to a 10-month high.