The UK markets registered a fifth consecutive day of losses as investors sold out of riskier assets. The benchmark FTSE 100 index fell by 5.5% over the week. The large-cap index declined by 1.3% on Friday, closing at 5,268. The mid-cap FTSE 250 index was also off by more than 5% by the end of the week. It plunged by another 1.5% on Friday, closing at 10,432.
“The political situation across Europe continues to dominate the picture,” said Simon Denham, CEO at Capital Spreads. “Talk of the break-up of the single currency continued to cause pressure on the stock markets with the fall being led by the Greek and Spanish banking industry. Moody's, the rating agency, cut the credit ratings of 16 Spanish banks, along with Santander UK (a subsidiary of the Spanish banking giant), due to ‘adverse operating conditions, characterised by the renewed recession, the ongoing real-estate crisis and persistent high levels of unemployment’.”
Commenting on the Moody's downgrades, Tristan Cooper, sovereign debt analyst at Fidelity Worldwide Investment, said "Moody's downgrade of Spanish banks has been signalled for some time. The timing is unfortunate for the Spanish authorities as it will fan the media storm around financial stability. With rumours of bank deposit withdrawals, Spain can ill-afford another blow to confidence. Once a bank run begins it is very hard to stop without a credible deposit guarantee. Given the fragile fiscal position of Spain, the ECB is under increasing pressure to step in to calm depositors' nerves."
Despite the gloomy mood pervading UK and global markets throughout the week, countless investors were excitedly anticipating Facebook’s (FB) IPO. The social-networking giant began trading as a public company on the NASDAQ on Friday.
“The most eagerly awaited IPO since Google saw Facebook shares open as much as 10% higher than the IPO price of $38, with the social media giant's share price first printing at $42. Shares then cooled to trade at $38 within the first 20 minutes of trading,” said Joshua Raymond, chief market strategist at City Index. “Make no mistake, the whole market was watching for the first share price print for Facebook and whilst an open of $42 shows a good first print, there has been adrenaline-fuelled hopes that we could have seen a print of $45-$50. That said, it marks a successful first opening for Facebook into public life and now the focus will switch towards whether the company can hold onto these gains once the adrenaline wanes and the hysteria mellows.”
Adding to the drama of the day, the Facebook IPO was unexpectedly delayed by an hour after technical issues caused trading problems. This “merely increased the anticipation in the markets,” said Raymond.
