Energy stocks drag the FTSE 100 under again
An extended sell-off of commodities issues continued to damage the UK stock market on Wednesaday, despite defensives' best efforts
The FTSE 100 index shed a further 1.2% on Wednesday to close down 50.1 points at 4,278.5, while the FTSE 250 index dropped 2.3% or 174.6 points to 7,309.5.
The US market fared much better than its European counterparts, however, as Wall Street breathed a sigh of relief in reaction to President Obama’s regulatory reforms. “The [US] government’s proposal aren’t exactly something to cheer,” a London-based trader said, “but the financial markets seem to have been let off lightly in this instance and fears of overly-restrictive regulation appear to have failed to materialise.”
Abating deflation fears also buoyed US indices after the latest official figures revealed a seasonally-adjusted 0.1% increase in core consumer prices last month. Those concerned over inflation clearly have a wait on their hands.
Within the UK, there was no let-up in the dire state of the labour market as the Office for National Statistics announced an additional 232,000 people were without jobs in the three months to April, bringing the ILO unemployment rate to its highest level in almost 12 years of 7.2%.
But it was commodities, rather than economic data, that held the FTSE 100 index in the red on Tuesday. The eight names at the top of the casualty list were all metal extractors, led by Xstrata, Lonmin and Kazakhmys, which each shed between 7.9% and 10.2%.
Supermarket group J Sainsbury took up tenth position among the fallers after its quarterly sales figures, which topped market forecasts, were overshadowed by news it is to ask shareholders for more cash. Sainsbury announced this morning that it plans to raise £445 million of new capital via a share placing and the issuance of convertible bonds and will use the proceeds to expand its store space by 15%.
The group also reported like-for-like sales growth excluding fuel and VAT of 7.8% in the 12 weeks to June 13—ahead of numbers unveiled by Tesco yesterday.
Sainsbury shares closed 5.7% lower at 313p, dragging with them peers Wm Morrison, Marks & Spencer and Tesco, which each slipped 1.6%-1.7%.
Oil & gas issues also hit the FTSE 100, tracking lower oil prices following a report from the US Energy Information Administration that revealed gasoline supplies increased by much more than was expected last week. Cairn Energy and BG Group each dropped 3.6% to a respective 2,275p and 1,037p.
On a more cheerful note, heavyweight Vodafone was the top FTSE 100 performer with a gain of 3.7% to 119.0p after Deutsche Telekom's chief financial officer told a conference it is close to sealing a deal that will give the UK firm access to its German peer’s very high speed digital subscriber line (VDSL).
Elsewhere, defensive pharma stocks AstraZeneca and GlaxoSmithKline helped keep index losses to a minimum, each adding 0.7%-2.5%, while BT Group was helped higher by a broker recommendation upgrade that saw the telco stock climb 3.0% to 105.6p.
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