Stocks Slide as Recovery Concerns Gather Pace

More disappointing data from across the pond undermined investors' already-fragile confidence on Tuesday

Holly Cook | 24-08-10 | E-mail Article

Stocks took a dive on Tuesday as investors became increasingly pessimistic about the global economic recovery following US housing market data, with energy, mining and banking stocks all weighing.

The FTSE 100 index closed 1.5% weaker, having shed 77.5 points to settle at a one-month of 5,157.3. The FTSE 250 index fared little better, losing 114.0 points or 1.2% to end the day at 9,712 2.

The National Association of Realtors reported existing-home sales in the US fell by 27.2% in July, to an annual rate of 3.83 million units--25.5% lower than the previous year’s number. Single-family home sales are at the lowest level since May 1995. However NAR chief economist Lawrence Yun said annual sales are expected to reach 5 million as a result of strong activity in the first half of the year. His tone of optimism fell on deaf ears, and investors instead sought out safe havens such as Treasuries.

Here in the UK, Wolseley was among the worst hit FTSE 100 players, sliding 5.1%. The plumbing and building materials supplier generates around half its revenues in the US, and depends on housing markets on both sides of the Atlantic for a substantial portion of sales.

But the main casualty was Vedanta Resources, which slumped 7.6%, in part on the back of investors’ retreat from riskier assets and in part following news the Indian authorities have rejected a bid to mine bauxite due to environmental concerns. Other miners and energy stocks were also under the cosh as asset allocators switched to perceived safer havens, with Rio Tinto, Kazakhmys and BP shedding 3.4%-4.3%.

Cairn Energy was another sector player that suffered, down 4.1% after disappointing shareholders by finding gas rather than oil at a drilling well in Greenland.

Away from natural resources, insurers Legal & General and Aviva slipped 5.0% and 2.4%, respectively, banks Royal Bank of Scotland and Lloyds Banking Group fell back 3.5% and 3.2%, and investment company 3i Group eased 2.7% as they tracked the broader index’s slide.

Holly Cook is Site Editor of Morningstar.co.uk and Hemscott.com. She would like to hear from you but cannot give financial advice. You can contact the author via this feedback form.
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