Britain's top share index fell sharply on Friday, ending the month in negative territory for the first time since June, led lower by commodity stocks and banks as confidence waned after mixed US data. The FTSE 100 closed down 93.17 points, or 1.8 percent, at 5,044.55, having risen 1.1 percent on Thursday after the release of above-forecast US growth data which signalled the country had come out of recession.
The index fell 1.7 percent in October, the first monthly drop since June. It also had its largest weekly fall, at 3.8 percent, since March. It is still up about 46 percent since the March low. US reports painting a mixed economic picture dented the optimism fed by the economy's return to growth. Friday's data showed Midwest area manufacturing was strong, but consumer sentiment slipped this month.
"We're back to reality," said Angus Campbell, head of sales at Capital Spreads, adding that the initial euphoria around the US GDP numbers has worn off, replaced by concerns over the sustainability of the possible recovery. Energy stocks were the hardest hit as concerns over demand resurfaced, with crude prices falling more than 3 percent to trade below $78 a barrel.
BG Group, BP and Royal Dutch Shell shed 2.4 to 3.4 percent. Against a background of weaker metals prices, mining issues dominated the list of top blue chip losers. Kazakhmys, Fresnillo, Xstrata, Eurasian Natural Resources, Lonmin and Antofagasta dropped 6.1 to 8.2 percent. Rio Tinto was also under pressure, off 3.3 percent. The company said it planned to double its capital expenditure next year to at least $5 billion and saw signs of economic recovery.
"Recent doubts over the health of the global economy, and ensuing concerns about demand for raw materials, have therefore put both the sector itself and the index as a whole under some pressure," Philip Gillett, sales trader at IG Index. Banks, which had enjoyed a rally earlier in the session, went into reverse as investors' appetite for risk cooled, reflecting falls from their US peers after the downbeat data.
Barclays, HSBC and Standard Chartered shed 1.1 to 2.4 percent. Lloyds Banking Group bucked the trend, adding 1.2 percent, benefiting from plans to raise capital as an alternative to a government-backed scheme to insure bad debts, prompting Credit Suisse and Exane BNP Paribas to up their ratings.
Lloyds could launch one of the world's largest cash calls as early as next week after talking to shareholders on Friday to gauge their appetite for the fundraising. Royal Bank of Scotland, also thought to be looking at plans to reduce its exposure to the government's asset protection scheme, fell 3.3 percent. As economic concerns re-emerged, defensive stocks were strong, with investors looking to assets perceived as safe bets.
Shire was the top FTSE 100 riser, adding 4.7 percent. The drugmaker's efforts to shift focus to its portfolio of new drugs from its former hyperactivity blockbuster Adderall XR have paid off with third-quarter revenue that beat analysts' expectations. Cigarette firm British American Tobacco rose 0.2 percent as Goldman Sachs lifted its target price for the company, while spirits group Diageo, also aided by a target price hike from the same broker, added 1 percent.