Britain's top share index fell on Wednesday, after downbeat data from China, Europe and the United States darkened the outlook for global growth and corporate earnings. London's blue chip index closed at its lowest level since October 6, falling 67.04 points, or 1.3 percent, to 5,291.26. The index has now fallen 7.3 percent in November as worries have grown that Europe's debt crisis could be terminal for the euro and would damage corporate earnings.
According to Thomson Reuters data earnings momentum - analysts' upgrades minus downgrades as a percentage of total estimates - for FTSE 100 companies is -8.3 percent, versus -10.8 percent a month ago. Mining and integrated oil stocks were among the worst performers, as commodity prices fell after weak data from China and in Europe pointed to a softening in demand.
HSBC's preliminary China manufacturing survey fell to a 32-month low in November, while eurozone industrial new orders tumbled by the most in almost 3 years. In the United States, consumer spending barely rose in October and initial claims for US unemployment benefit rose slightly last week. And while new orders for a range of long-lasting US manufactured goods unexpectedly rose in October, sharp downward revisions to the prior month's data and weak spending plans by businesses suggested manufacturing was taking a breather.
Against this weaker backdrop, the focus was firmly on those companies reporting earnings. United Utilities, Britain's largest listed water utility, shed 1.1 percent after it reported a dip in first-half profits. Compass Group, the world's biggest caterer, fell 2.9 percent as the firm reported in line full-year results, but Evolution Securities said it was likely to trim earnings forecasts to reflect a tougher eurozone market. Meggitt slipped 3 percent as UBS cut its rating on the aircraft parts supplier to "sell" from "neutral" and reduced its earnings forecasts, following a recent update.
Johnson Matthey shed 1.2 percent despite the world's largest supplier of catalytic converters, posting a 24 percent rise in first-half profit. Financials, which have big exposure to the European debt crisis, were weaker as Fitch Ratings warned France had limited room to absorb any new shocks to its public finances without endangering its cherished AAA credit rating.
The Fitch analysis followed reports, denied by France, that a restructuring deal for Franco-Belgian bank Dexia DEXI.BR might have to be renegotiated. Bank of England policymakers said the chances of a worst-case outcome for the eurozone crisis had increased over the past month, and were split on the likelihood of a further increase to its quantitative easing programme.
Germany blamed heightened nerves among investors when its debt agency was forced to retain a huge portion of a new 10-year Bund issue as bids fell short. "Is this the start of German credit erosion, the point at which Germany finds out that it is the only first class passenger on the Titanic?" RBS said in a note. Angus Campbell, Head of Sales, Capital Spreads, said the lack of confidence evident in the bond market was feeding through to the equity markets.
"In the run up to the end of the year, any potential for the usual Christmas rally could be scuppered." Carnival, HSBC, Man Group and Next fell up to 10 percent as they all traded without their dividend payout attractions. Defensive stocks were among the few risers as investors looked for protection from the macro gloom, with Reckitt Benckiser and GlaxoSmithKline up 0.3 and 0.7 percent, respectively.
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