Economy fears hit FTSE recovery
Weaker-than-expected European economic data gave British investors a jolt today as the FTSE 100 Index slipped back from yesterday’s three-week high.
In a continuation of recent choppy trading conditions for world markets, London’s top flight slipped 9.3 points to 6522.9 in the wake of disappointing export figures for the UK and Germany.
Investors have also turned their attention to the September 18 meeting of the US Federal Reserve, when policymakers may begin the pull back of their massive quantitative easing programme.
This expectation was reinforced by figures showing the number of Americans seeking unemployment benefits was close to a five-year low.
Today’s trade figures showed the UK’s deficit in goods increased from £8.2 billion to £9.9 billion, reflecting a 9.3% fall in goods exports excluding oil compared to June.
Economists said the statistics fuelled worries that slowing growth in the world’s emerging economies is sapping demand for British products.
Germany’s exports also dropped unexpectedly in July and industrial production fell, even as the economies of the countries using the euro showed signs of improvement.
The economic uncertainty put pressure on some commodity stocks, with Anglo American down 22.25p at 1548.75p and Randgold Resources off 96.5p to 4958.5p.
B&Q owner Kingfisher was among other fallers, off 1.2p to 404.65p, after Morgan Stanley downgraded the stock with a price target of 300p.
The broker said B&Q stands to gain far less from a housing market recovery in the UK than Home Depot in the United States. Investors will have a chance to test this theory next week as Kingfisher is due to present half-year results.
Elsewhere in the retail sector, sentiment towards Marks & Spencer continued to improve, with shares setting a new five year high at 500.25p, a rise of 1%.
Oil explorer Tullow Oil topped the risers board after it announced a discovery in Norway’s Arctic region and Barclays raised its price target on the stock.
Tullow, which lifted 2% or 24.5p to 1057.5p, said the discovery at Wisting Central demonstrates the value of its recent Spring Energy acquisition.
Outside the top flight, inter-dealer broker ICAP was down 3p at 397p amid reports that it is close to an agreement with regulators over its alleged involvement in the Libor-rigging scandal.
The biggest riser in the FTSE 250 Index was Thomas Cook as sentiment towards travel companies recovered following the shock profits warning from Ryanair earlier in the week. Shares lifted 7.5p to 146.2p.
