UK stocks closing: Britain’s top share index fell on Monday,led by miners,as dull European data kept the focus on a gloomy economic outlook,tempering the boost given to markets by recent central bank stimulus moves in Europe and the United States.
Germany’s Ifo index of business sentiment fell for a fifth month running,bucking expectations for a rise,to become the latest in a run of poor data from major economies.
That data has turned investors’ minds back to the longer-term problems of both Europe and the United States in generating growth while trying to get public debt under control.
Today’s probably more by way of a reality check … (the) weak Ifo doesn’t really help,said Frances Hudson,global thematic strategist at Standard Life Investments,which has 157.6 billion pounds ($255.3 billion) of assets under management.
A lot of positive feedback has been read into the central bank easing,whether it’s the ECB or the Fed,and anything like that is going to take a long time to deliver,Hudson said.
The FTSE 100 closed down 13.78 points,or 0.2 percent at 5,838.84,having notched up a loss of 1.1 percent last week after two consecutive weeks of gains.
Weakness in heavyweight miners accounted for around 8 points,or over half of the index’s decline as the sector tracked weaker copper prices.
Overall the mining sector has fallen around 5 percent since the release late last week of dull manufacturing data out of China,the world’s top consumer of metals.
JPMorgan Chase recommended that investors pocket recent gains in the sector because the impact of stalling global – and particularly Chinese – growth momentum was offsetting the modest boost generated by the U.S. Federal Reserve’s new asset-buying programme.
A healthy period of consolidation to a market underpinned by the printing presses might not be a bad thing,helping to remove some of the froth and tail risks presented to the market by the recent rush into riskier assets,said David White,a trader of financials at Spreadex.
JPMorgan Chase’s top sector picks were Rio Tinto,Antofagasta,Fresnillo and BHP Billiton and it said it would avoid Anglo American and Kazakhmys.
Anglo American,down 2.9 percent,also suffered as BofA Merrill Lynch cut its rating to neutral from buy with a reduced target price of 2,400 pence.
Weak banks also dragged on the blue chips,reversing a summer rally as investors’ appetite for risk shrank and the focus returned to lenders’ exposure to euro zone debt.
The banking sector has gained over 18 percent since late July when ECB president Mario Draghi promised in a speech to do everything in his mandate to protect the euro.
The euro zone’s troubles were back in focus this week with Spain,under pressure to submit to a rescue programme,due to present its 2013 budget on Thursday and with talks due to restart between Greece and the EU/IMF/ECB troika on the progress of austerity measures linked to a rescue package.
As risk appetite took a knock,stocks seen as less dependent on the economic cycle found support,with drugmakers the biggest gainers led by Shire,up 1.7 percent helped by positive comments from Exane BNP Paribas in a review of the European sector.
Positive comments from Credit Suisse strategist Andrew Garthwaite on UK equities also helped underpin the market.
Garthwaite reiterated an overweight stance on UK equities,with a year-end target for the FTSE 100 of 6,250,as in his view the index is not nearly as overbought as other equity markets.
We think investors underestimate the potential for the UK to deliver a positive growth surprise relative to other developed economies,Garthwaite said.