Britain's FTSE 100 index closed down 1.6 percent on Thursday, its biggest loss in a month as growing tension in the Middle East pushed oil prices higher and miners slumped on commodity price declines.
Accounting software company Sage was one of the biggest FTSE fallers, down 4.7 percent after German software giant SAP missed analysts' expectations for licence sales and operating earnings in the second quarter.
Traders said the SAP disappointment, which followed under par results from US companies 3M Co and Alcoa Inc, had hurt an already unsettled London market.
"We're into the results season in the US, and I don't think it's started very well. The SAP figures have raised some concerns about corporate earnings," said Robert Parkes, UK equities strategist at HSBC Securities,
"It's early days yet, but the market's taking the view that a fall-off in earnings could be broad-based. We think earnings are going to hold up relatively well. Global growth was pretty strong in Q2," he added.
Banks and insurers, which are liquid stocks often seen as a proxy for the London share market, led the declines as investors looked at ways to spread out risk and fretted over the economic outlook.
"If you've got worries about the economy, inflation and interest rates, then that's not good for the banks. If you want to get a bit of money out of the market, it's an easy way to do it," said a trader, adding that financials with links to emerging markets such as London-listed South African insurer Old Mutual and Asia-focused bank Standard Chartered were being hit hard.
Old Mutual fell 5.2 percent, and Standard Chartered lost 2.9 percent.
The FTSE 100 closed down 95.6 points at 5,765.0, its biggest fall since June 13. Traders said the attacks by Israel on targets in Lebanon in reprisals for Hizbollah guerrilla attacks had upped the temperature in the Middle East, where Iran is at loggerheads with the West over its nuclear ambitions.
"Even the oil stocks are failing to make any real headway right now, and it does seem that after the run-up from the early June lows close to 5,500, traders remain eager to book profits wherever possible," said Paul Webb, a trader at CMC Markets.
"Things have taken a decided turn for the worse in the Middle East, and that's had a consequent impact on the oil price, which adds to inflationary pressures and weighs on global growth and so on," said the first trader.
Concerns over heightened Middle East tensions knocked shares in the world's largest cruise operator, Carnival Plc, by 3.6 percent. A spokesman for Carnival had no immediate comment.
"The Carnival share price fall is a reaction to the world becoming a slightly more dangerous place. Americans don't get on boats or go on holiday outside their own shores so much when the Middle East is kicking off and there are concerns over Iran," said a market maker.
MINERS MAJOR FALLERS:
After having been buoyant in recent sessions, miners fell as copper prices eased from recent six-week highs. Antofagasta was down 3.7 percent, Vedanta 5.3 percent and London-listed Kazakhmys, Kazakhstan's biggest copper producer, 2.6 percent.
Shares in insurer Aviva fell 3.2 percent after it announced the completion of a 900 million pound share placing. Earlier it said it was placing 129 million new shares at 700 pence apiece to help fund an agreed $2.9 billion take-over of US life insurer AmerUs Group Co.
"An expensive and unattractive deal, which may be followed by another since (it is) not big enough," said one dealer. Among mid-caps, shares in Emap also slid nearly 15 percent after the UK media group said that underlying revenue might be down slightly in the first half and broadly flat for the year amid worsening trading conditions.
Britain's biggest listed insurance broker, Jardine Lloyd Thompson Group Plc, dropped 10.1 percent after Heath Lambert Group said it had ended talks on a potential acquisition by JLT, which analysts had expected to enhance JLT earnings.
"People saw this as an earnings-enhancing deal for Jardine Lloyd Thompson. So if the market was assuming that deal was going ahead, they're not going to be happy now," said a market maker.
Losses in the broadly based FTSE midcap 250 were even more pronounced than in the internationally influenced FTSE 100, with the midcap index dropping nearly 2 percent to 9,176.2 points.
Defensive stocks, those in companies such as utilities that are seen as offering products or services resistant to economic cycles, were among the day's handful of FTSE 100 gainers.
They included supermarkets group Tesco up 0.9 percent and household products group Reckitt Benckiser, 0.6 percent higher. Three utilities made fractional gains.
Comments
Comments are closed.