Britain's top equity index slid to its lowest closing level so far this year on Thursday on disappointment with the European Central Bank's latest stimulus measures. The UK's blue-chip FTSE 100 index ended down by 1.7 percent, or 111.13 points, at 6,446.39 points - its lowest closing level since ending at 6,439.96 points in December 2013, and marking one of its worst daily sessions in 2014.
ECB President Mario Draghi said the bank would begin to buy covered bonds, a form of secured debt, from banks in mid-October and purchase asset-backed securities (ABS) - bundled loans - at some point this quarter. But the bank did not specify an overall amount for the ABS-buying programme, and traders were dismayed that Draghi gave no further hints about extra measures such as quantitative easing (QE).
"We expected more of a bazooka for the market," said JNF Capital trader Rick Jones. Nevertheless, Jones said he would look to buy into the FTSE 100 on the back of its recent retreat, on expectations that the FTSE would rebound later in the year. Securequity sales trader Jawaid Afsar also felt the FTSE was worth buying at current levels, saying the index could recover from here provided any further declines did not push it below this year's intraday lows in the 6,420 point region that were reached in early February.
"If we can bounce from here, then we could have a good rally into the year-end. But if we break below this year's intraday low, then all bets are off," said Afsar. Equipment rental company Ashtead was the worst-performing FTSE stock in percentage terms, falling 4.6 percent. Traders attributed Ashtead's fall to a 6 percent drop on Wednesday in the shares of its rival United Rental, with both companies hurt by weak US factory activity data this week. Ashtead derives 84 percent of its revenues from the United States.
The FTSE 100 is currently some 7 percent below its peak for this year of 6,904.86 points, reached last month which marked the FTSE's highest level since early 2000. The index has fallen by around 5 percent since the start of 2014, underperforming a near 2 percent gain in the broader, pan-European FTSEurofirst 300 index. Dafydd Davies, partner at Charles Hanover Investments, said he would be happy to buy the FTSE at current levels but others were more cautious, pointing out negative factors such as civil protests in Hong Kong that have weighed on financial markets. "The overall impression is that sentiment has shifted to a more negative bias," said Bill McNamara, technical analyst at Charles Stanley.
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