Britain's top shares slid 2.3 percent on Wednesday, as market turbulence swept through Europe and Wall Street dipped its toes into bear market territory amid persistent fears of a US recession. A surprise US rate cut of 75 basis points to 3.5 percent the day before offered initial respite, prompting Asia to rally and Europe to open higher.
But the relief was short-lived as markets sensed the Fed's move was a palliative rather than a cure for raging recession anxiety. "We're going to live in very volatile conditions for some months," said David Buik of Cantor Index. The FTSE 100 closed down 130.8 points at 5,609.3 as the market buzzed with talk of further subprime write-downs and surprise interest rate cuts.
"It's whipping around, this market, it's all over the place," said Roger Cursley, UK strategist at Investec. The FTSE slumped 5.5 percent on Monday, its largest daily loss since September 11, 2001, and has lost about 13 percent since the start of the year as recession fears have grown.
Hacking more than 50 points off the index, energy shares took a battering following a series of price cuts from brokerage Bernstein and as US crude oil prices recoiled on fears over the state of the US economy. Oil major BP shed 4.4 percent, its rival Royal Dutch Shell lost 5.2 percent and BG Group dropped 4.5 percent.
Meanwhile, US stocks posted steep falls as disappointing profit forecasts from Apple Inc and Motorola added to recession worries, pushing the Nasdaq across the threshold that signals a bear market. "We think it will just about avoid recession, but that's increasingly sounding like a lone voice in the wilderness," Investec's Cursley said of the United States.
Investors kept a keen eye on the Bank of England (BoE). Earlier in the day, minutes from the BoE's Monetary Policy Committee showed eight members voted for no change in rates at this month's meeting, while only one voted for a cut.
A Reuters poll showed the BoE will cut in February to head off fears of slowing growth despite only a one-in-four chance of a recession, and end the year with rates at 4.75 percent.
BoE Governor Mervyn King appeared to pave the way for a February interest rate cut in a speech on Tuesday while also warning that price pressures might prevent any sharper monetary easing beyond that. Miners broadly entrenched themselves into the red as copper prices dropped 2.5 percent.
But shares in Xstrata rose 2.4 percent on market talk of a 4,000 pence-per-share bid for the miner by the end of the week, traders said. Xstrata declined to comment. Anglo American also defied the gloom, up 2.6 percent following an upgrade to "buy" from "hold" by Citigroup.
Banks staged a recovery from recent losses, with Alliance & Leicester up 3.9 percent and Standard Chartered rising 2.7 percent. HSBC climbed 2 percent, helped by an upgrade to "hold" from "sell" by ABN Amro. ITV fell 4.1 percent after Bear Stearns issued a note saying the British broadcaster faces some tough times ahead.
Comments
Comments are closed.