Britain's benchmark share index fell for the fourth consecutive day on Friday, as uncertainty over the economy and any new monetary stimulus measures resulted in a late sell-off after the market had spent much of the day in positive territory. The blue-chip FTSE 100 index closed down 0.1 percent, or 7.97 points lower, at 5,711.48 points.
The index rose 1.4 percent during August, but it has fallen 2.8 percent since reaching a peak of 5,876.22 points some two weeks ago. Worries over the weak economic backdrop, highlighted by the ongoing euro zone sovereign debt crisis, have also pegged back the FTSE 100, which has failed to breach the technically key level of 5,900 points. "We are still looking to sell into strength," said JN Financial senior trader Adrian Redmond. A keynote speech by US Federal Reserve Chairman Ben Bernanke on Friday left the door open for possible new quantitative easing measures to tackle the economic slowdown, although he gave no clear signs that new steps were imminent.
Bernanke said on Friday that the US economy faced "daunting" challenges and that progress reducing unemployment had been too slow, but he stopped short of providing a clear signal of further easing. Brown Shipley fund manager John Smith said he did not expect an immediate launch of new action to fight the global economic slowdown, leading him to favour more defensive equity sectors such as healthcare or food companies.
Smith's favoured stocks included drinks group Diageo, healthcare company GlaxoSmithKline, consumer goods group Unilever and utility National Grid over more volatile investments such as mining companies. "We are of the opinion that there will be some more QE (quantitative easing) but we don't see it in the short term. We've sat on the sidelines. It's a little bit too early to be aggressively buying cyclical stocks such as the miners," he said.
Mining stocks suffered mixed fortunes. Glencore rose 7.7 percent while its merger partner Xstrata gained 5.7 percent, rebounding sharply after falling between 2 and 3 percent on Thursday, on the back of objections from some investors to the terms of their merger. Rival miner ENRC led the FTSE 100 loserboard, slipping by 1.5 percent after Nomura cut its price target on the stock to 375 pence from 400 pence.
Securequity sales trader Jawaid Afsar said he would use any declines in the market as an opportunity to buy, and had snapped up shares in utility SSE and in ENRC and rival miner Kazakhmys on Friday. Others were more cautious. Charles de Roeper, head of trading at Berkeley Futures Ltd, said he had taken back some call options on the FTSE 100 - which give the right to buy at a fixed price in the future - on worries of future volatility in the market, even though the FTSE 100 volatility index closed down 4.4 percent.
EGR Broking director Steven Mayne said he had spent much of the week selling shares due to the doubts over the next steps from the Fed and European Central Bank. "We were taking profits all of yesterday. When you've got these curveballs in the market, it's better to sit on cash going forward," said Mayne.
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