The UK’s benchmark index fell back below 5,600 points on Monday, taking its lead from Asian markets and passing the trend onto Wall Street, amid weaker oil prices and a warning from Moody’s regarding sovereign risk.
Both the blue-chip and mid-cap indices had shed 0.6% by close play, with the FTSE 100 index down 34.7 points at 5,591.0 and the FTSE 250 index 60.5 points weaker at 9,881.1.
A warning from Moody's that risks are growing for the four largest AAA-rated countries—the UK, France, Germany and the US—dampened the mood, while Chinese Premier Wen Jiabao also raised alarm by suggesting financial system risks and high unemployment levels could mean a double-dip recession is on the cards. In addition, crude-oil prices dragged energy stocks lower and technology plays were under pressure from rumours Google is increasingly likely to close its Chinese language site.
On top of all this, today's economic data was also uninspiring. US industrial production unexpectedly rose 0.1% in February, despite massive snowstorms, but the increase failed to encourage investors looking toward central bank meetings and announcements over the next few days.
With just one in four FTSE 100 constituents registering gains on Monday, it should come as little surprise that many of these were favoured for their defensive characteristics. Utility providers Centrica, National Grid and Severn Trent took on 1.6%, 0.5% and 0.4%, respectively, while pharma firms Shire and GlaxoSmithKline added 1.2% and 0.4% and drinks manufacturers SABMiller and Diageo rose 1.0% and 0.5%.
On the downside, metal extractors including Eurasian Natural Resources, Antofagasta, Fresnillo and Xstrata each saw 3.0% or more shaved off their market value as concern over China’s plans to tighten monetary policy again took centre stage.
A range of financials also felt the heat, with most banks tracking their US counterparts lower ahead of Senate Banking Committee chairman Christopher Dodd’s announcement later today regarding a financial regulations bill. Lloyds Banking Group fell back 1.5% and Barclays lost 0.9%, while insurer Prudential dropped 2.7% and listed hedge fund manager Man Group came off 1.9%.
Elsewhere, there was some excitement for clothing retailers after French Connection surprised by bringing their annual results forward from Wednesday and accompanying them with news it has sold its loss-making Nicole Farhi brand and closed down most of its US stores as part of a restructuring exercise. The outlook for now “very much brighter,” Arden Partners wrote today in a sector note, adding that management can now focus on a “smaller but cleaner” business going forward.
Small-cap French Connection surged 11.3%, while Marks & Spencer and Next ticked up 1.0% and 0.1%, respectively.
