After Monday’s extension of the market rally that saw the FTSE 100 climb 3.5% in three days, London-listed shares tumbled back into the red on Tuesday.
The FTSE 100 index closed down 61 points or 1.1% at 5,635, while the FTSE 250 index shed 102 points or 0.9% to settle at 11,137.
The downturn was triggered by a combination of weak corporate earnings from the banking and energy sectors and apprehension ahead of the Bank of England and European Central Bank meetings later in the week.
Investors’ eyes were also fixed on the US Federal Reserve, which was today engaged in its two-day policy meeting that could lead to an announcement of further economic stimulus. Meanwhile, hopes remained that the ECB would resume its bond-buying programme to temper rising Spanish and Italian borrowing costs, but Germany opposes such a plan and the general market sentiment points towards Thursday’s ECB meeting failing to deliver decisive action.
On the FTSE 100, less than one fifth of the index constituents managed to remain above breakeven on Friday, but natural resources were the clear winners, with Vedanta (VED), Rio Tinto (RIO) and Glencore (GLEN) topping the leaderboard, up 5.8%, 1.0% and 0.9%, respectively. Vedanta’s production numbers for the quarter to end-June, released this morning, were particularly well received.
Elsewhere, it was mainly defensive stocks that featured on the up side, including Unilever (ULVR), 0.8% higher, British American Tobacco (BATS), 0.2% firmer, and Scottish & Southern Energy (SSE), which edged up 0.2%.
On the downside, BP (BP.) dominated the headlines after revealing that second-quarter profits nose-dived on the back of impairment charges on the value of its US shale gas assets. The oil & gas giant wrote down the value of several key assets by $5 billion, but even excluding these one-off costs, analysts said the company's performance was weak. Shares in BP ended the session 4.4% lower.
In other earnings news, HSBC (HSBA) declined 1.7% after the bank set aside $2 billion to cover the cost of possible penalties even as it apologised to shareholders for compliance failings. The bank has been accused of helping drug lords in Mexico launder money.
But the biggest casualty in terms of share price falls on the day was CRH (CRH). The building materials manufacturer dropped 5.8% on negative readacross from German peer HeidelbergCement, which published solid earnings on Tuesday but also described weakness in Europe, particularly CRH’s Polish and Dutch markets. CRH will publish its own results in a fortnight.
