FTSE tumbles on poor US data
Markets tumbled today after poor employment and manufacturing reports in the US renewed investors’ concerns about the pace of global recovery.
Officials said claims for unemployment benefits rose unexpectedly last week, while the Federal Reserve of Philadelphia added that manufacturing activity in the country’s mid-Atlantic region had dropped.
The FTSE 100 Index slumped 91.6 points to 5211.3, while Wall Street’s Dow Jones Industrial Average was more than 1% lower by the time of London’s close.
The latest data will fuel fears that the pace of recovery in the US economy is starting to slow, a sentiment shared by the US Federal Reserve last week.
The London market had earlier been in positive territory after the Office of National Statistics reported a stronger-than-expected July for UK high street retailers and signs of an improved trend for the public finances.
The CBI snapshot of the UK manufacturing sector for the last month was also positive with order books at their best level for two years.
The contrasting economic picture for the UK and United States was reflected in the currency markets, with the pound up against the greenback at 1.56 dollars and also healthier against the euro.
Today’s UK retail figures, which showed sales volumes up by 1.1% in July, offered a short-lived boost to a number of stocks prior to the US setback.
However, Morrisons clung to positive territory with a rise of 5.4p to 287p while Sainsbury’s shares added 1.7p to 356.9p after industry figures earlier this week suggested the pair had improved their market share.
The fallers board saw United Utilities drop 3% or 17p to 572.5p after JP Morgan downgraded the stock and said earnings forecasts were at risk because of factors such as higher property rates.
Severn Trent was also impacted by the downgrade as it fell 22p to 1300p, while in the FTSE 250 Index South West Water owner Pennon dropped 20.50p to 566p and Northumbrian Water eased 6.4p to 313.5p.
Insurers were lower after a week of speculation about potential consolidation in the sector generated buying interest. Prudential eased 17.5p to 570p and Standard Life dropped 3.4p to 205p.
On the results front, shares in Cineworld slipped despite the cinema operator reporting a 5% rise in half-year earnings to £24.4m (€29.7m). It also forecast a boost from a decent schedule of film releases in the second half, but shares drifted 10.3p to 199p in the wake of the results.
John Menzies, the aviation services and newspaper distribution firm, said it expected full-year figures to exceed current market expectations. Shares were 6.5% or 27p higher at 441p.
The biggest Footsie risers were Serco Group up 14p to 562p, Arm Holdings ahead 6.1p to 320.3p, Morrisons up 5.4p to 287p and Randgold Resources ahead 50p to 5820p.
The biggest Footsie fallers were Inmarsat down 37p to 688p, Vedanta Resources off 104p to 688p, Eurasian Natural Resources down 40.5p to 886p and Cairn Energy off 20.4p to 459.3p.
