Britain's top equity index fell to its lowest closing level since mid-February on Monday, dragged down by major mining stocks and telecoms group Vodafone. The blue-chip FTSE 100 index closed down by 0.4 percent, or 23.22 points, at 6,689.45 points - marking its lowest closing level since it ended at 6,663.62 points on February 14.
The FTSE also fell below its 50-day simple moving average level - often interpreted by some technical traders as a sign of further weakness to come in the near-term. Major mining stocks such as Glencore Xstrata and Anglo American featured on the FTSE's loserboard of worst-performing shares, hit by new signs of a possible economic slowdown in China - the world's top metals consumer.
The FTSE 350 Mining Index fell 1.8 percent, underperforming the broader market for the second consecutive session, after data over the weekend showed exports in China unexpectedly fell in February. The decline in the mining sector followed falls on Friday after a landmark corporate bond default in China had also raised fears about possible economic problems in the country. Chinese steel and iron ore futures also dropped to their lowest levels ever on Monday after the surprise decline in China's exports.
"Any poor news from China is always going to hit short-term market sentiment, especially in the mining sector, and fears of slower growth will hit base metals," said IPR Capital director Steven Mayne. A 3.6 percent fall at Vodafone also weighed on the FTSE. Analysts and traders attributed Vodafone's drop to the fact the company had to raise its initial bid for Spanish cable group Ono.
"It looks as if Vodafone might be overpaying and adding more leverage to their balance sheet," said Central Markets trading analyst Joe Neighbour. Traders added that one side-effect of the bid for Ono might be to dampen ongoing speculation that US peer AT&T might at some stage make a bid for Vodafone.
The FTSE 100 rose 14.4 percent in February to post its best annual gain since 2009, but the index has failed to break above its 2014 peak of 6,867.42 points hit in late January and last year's peak of 6,875.62 points. Global equity markets have been pegged back over the past month by concerns over tensions between Russia and Ukraine, after Russia's effective seizure of Ukraine's Crimea region, and by worries over a Chinese slowdown. Many traders have bought stocks using dips in the market to add to equity positions, given expectations that the UK stock market will rise later in the year as the British economy slowly recovers.
However, Beaufort Securities' chief investment strategist Mike Franklin advocated using signs of market uncertainty to trim back equity holdings for a profit. "Given that we can't be sure how much longer this bull phase will persist, it is important to remain focused on locking in profits when the opportunity arises," he said.
Comments
Comments are closed.