Sea of Red Flows Over European Markets
London-listed shares suffered widespread losses once again as fears of tighter financial regulation unnerved investors
The FTSE 100 index dropped 2.8% as a widespread selloff took 149.3 points off the benchmark index, which closed at 5,158.1. The FTSE 250 index suffered a similar fate, slumping 322.6 points or 3.2% to settle at 9,670.6.
Sterling fell to a 13-month low against the US dollar, while the euro tentatively recouped some losses after hitting a fresh four-year low against the greenback and falling against other peers too.
The German financial regulator on Tuesday banned naked short selling, by which speculators trade against companies that investors don’t own, and on Wednesday the country’s chancellor, Angela Merkel said Germany will act alone if necessary to control the “destructive” financial markets.
Data from across the pond also raised investors’ temperatures, after US consumer prices slipped for the first time in over a year, giving the Federal Reserve room to continue near-zero interest rates. Consumer prices fell 0.1% last month versus a 0.1% increase in March. Excluding volatile energy and food items, however, underlying consumer prices were unchanged.
And here in the UK, the minutes of the latest Monetary Policy Committee meeting revealed the Bank of England policy makers voted unanimously to keep the quantitative easing purchase programme at £200 billion this month as debt-fuelled risks took precedence over inflationary ones.
On the London stock exchange, GlaxoSmithKline was the sole riser among top-tier players, up 0.4% after publishing research that identifies promising potential leads to develop new medicines to treat malaria. Of the other 99 stocks that fell into the red on Wednesday, miners stood out as severe underperformers as investors shunned ‘riskier’ assets. Xstrata was the main blue-chip casualty, down 7.5%, while Kazakhmys, Rio Tinto and Eurasian Natural Resources dropped 6.5% and more each.
Banks were also out of favour, unsurprisingly, with Barclays, Royal Bank of Scotland and Lloyds Banking Group shedding 5.1%, 4.5% and 3.2%, respectively.
Among those reporting earnings today, ICAP stumbled 4.2% lower after the interdealer broker posted a 5% slide in full-year pretax profits on a 1% rise in revenue to £1.6 billion.
British Airways also lost some air, weighed down by further flight halts as the airline struggled to return to a full timetable following a court refusal of its cabin crew’s planned five-day strike. BA shares closed 3.8% lighter.
On the second tier, Mitchells & Butlers was one of only nine mid-caps that managed to close above breakeven on Wednesday, jumping 5.0% on the back of a strong interim report, accompanied by comments management is increasingly confident of the pubs operator's prospects.
