Britain's top share index shed 0.7 percent on Monday after a roller-coaster session, with early strong gains on relief over a debt deal in Washington wiped out later by weak ISM data which threw the spotlight back on a faltering US economy.
At the close, the FTSE 100 index was down 40.76 points, or 0.7 percent at 5,774.43, having reversed from triple-digit session highs back above the 5,900 level. HSBC bucks trend after strong H1 results The UK index tracked a similar reversal on Wall Street, with the US blue chip index down 1.0 percent by London's close, having opened strongly higher only to be knocked by a weak reading on the manufacturing sector.
The Institute for Supply Management (ISM) said growth in the US manufacturing sector slowed more than expected in July while new orders hit their lowest level since June 2009. "What would not normally be considered as a particularly major piece of data .. (caused) sentiment to turn on a sixpence and ruin all the hard work achieved by the bulls earlier in the day," said Angus Campbell, Head of Sales, at Capital Spreads. US-focused plumbing supplies group Wolseley was a big blue chip faller, down 3.9 percent as the data raised fresh worries about the strength of the US econonmy.
"The focus now is very much on macroeconomic data and corporate earnings, both of which we have plenty of," Campbell added, spotlighting Friday's August US jobs report and the UK banks reporting season. Part-nationalised lenders Lloyds Banking Group and Royal Bank of Scotland were the top two blue chip fallers, down 5.0 percent and 4.3 percent respectively, with the duo set to report numbers later this week.
Overall, however, the UK banking sector managed modest gains thanks to strength in global heavyweight HSBC, up 2.2 percent after it posted better-than-expected first-half numbers on Monday. Europe's biggest bank rose 4.8 percent after unveiling first-half pretax profit of $11.5 billion, and as it announced it will shed 30,000 jobs - roughly 10 percent of its workforce.
"These results look better than expected, underlining the attractions of HSBC's conservative balance sheet," said Seymour Pierce analyst Bruce Packard, who reiterated his "buy" rating and 800 pence price target on the stock. Investors were nervously looking ahead to a crucial vote in the US Congress on Monday after a White House-backed agreement was reached at the weekend to cut about $2.4 trillion from the deficit and avoid a humiliating credit default.
"I think the initial US debt accord news removed part of the uncertainty in the market, but we still need to get the votes to pass it," said Paul Mumford, senior fund manager at Cavendish, which has 700 million pounds under management. Defence contractors were big blue chip fallers, with Mumford noting worries about the impact on the sector of any potential cuts in the US military budget from the deficit reduction plan.
Smiths Group shed 3.2 percent, with BAE Systems down 3 percent, and Rolls-Royce off 1 percent. Traders also pointed out that BAE and Rolls both benefited strongly last week following well-received results, while a downgrade in its rating by Oriel Securities also hit BAE. Among the blue chip gainers, well-received results on Monday gave a boost to testing firm Interek, the top FTSE 100 riser up 3.9 percent, and real estate group Hammerson, ahead 1.4 percent.