London: Britain’s top share index fell on Monday to its lowest level in two months on persistent euro zone peripheral debt concerns, while an Icelandic volcano eruption put pressure on travel and oil stocks.
London’s blue chip index was down 93.45 points, or 1.6% at 5,855.06 by 2:19pm- its lowest level since 24 March. It dropped below its 50-day moving average - a move considered negative for equities that could point to more selling pressure.
Investors are again focused on the euro zone peripheral debt crisis, following Fitch Ratings’ downgrade of Greece’s credit rating on Friday.
Adding to these worries was news out on Saturday that Standard & Poor’s cut its outlook for Italy to “negative” from “stable.” S&P’s main concern was that any possible restructuring of Greek debt could have contagion effects for other euro zone peripheral countries.
“We are slightly cautious on the market over the next three to six months over a lack of clarity over the bigger macro issues such as the European sovereign debt,” said Neil Tong, head of UK equities at Alliance Trust, which has £2.5 billion of assets under management.
“We have cut down our exposure to miners and it is not surprising they are coming under pressure, but if the situation improved then we would be looking to opportunities to re-invest.”
Mining stocks continued their falls from the previous session as risk appetite deteriorated and base metal prices slipped, with copper down 2.4 % after the dollar strengthened on the euro zone peripheral debt issues.
Anglo American, Antofagasta and Xstrata were down 3.1 to 4.5%.
Oil stocks were also hit, along with U.S crude futures for July on the renewed euro zone peripheral debt worries, plus expectations of lower oil demand from Europe as a volcanic eruption threatened air travel disruption.
BP, BG Group and Royal Dutch Shell were 1.3 to 1.9% lower.
TRAVEL STOCKS WEIGH
The Icelandic volcano eruption at the weekend put travel stocks under pressure due to worries about possible disruption, with forecasters saying ash could reach Scotland on Tuesday and touch parts of France and Spain by Thursday or Friday.
International Airlines Group, formed by the merger of BA and Iberia, fell 3.5%, while Europe’s biggest tour operator TUI Travel slipped 3.9%.
IAG was also hit by negative read across from Ryanair after it said high fuel costs and a lack of growth in capacity would mean flat earnings in the coming year. Ryanair dropped 4.7%.
Traders said that the technical picture looked bearish for FTSE 100.
“Things look weak technically and fundamentally as investors focus on the Greek issue, so all eyes on a break and close below the 5850 level which could lead to further selling pressure,” said Simon Denham, head of Capital Spreads.
“Since the recent failure to take out the 2011 highs around 6100 the market has made two attempts at getting back up there but the lack of momentum has formed two lower highs, another classic bearish signal.”
On the upside, a standout riser was ICAP, boosted by broker Credit Suisse after it double-upgraded its rating for the inter-dealer broker to “outperform” from “underperform”.