×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

FTSE retreats, investors nervous ahead of budget

FTSE retreats, investors nervous ahead of budget
Comment E-mail Print Share
First Published: Tue, Jun 22 2010. 03 58 PM IST
Updated: Tue, Jun 22 2010. 03 58 PM IST
London: Weaker commodity stocks and banks pushed Britain’s top share index lower by mid-day on Tuesday as confidence prompted by China’s decision to give its currency more flexibility faded.
There were also nerves ahead of an emergency British budget which is expected to contain massive spending cuts and tax rises as worries about sovereign debt levels spread throughout Europe.
By 1033 GMT, the FTSE 100 was down 75.90 points, or 1.4% lower at 5,223.21, having gained 0.9% on Monday to touch its highest close in a month.
China’s decision to allow bigger daily moves in the yuan had led on Monday to hopes that it would boost China’s ability to buy imported goods, supporting a strong rally in demand sensitive stocks like miners and oils.
These, however, retreated on Tuesday as scepticism over the extent of the rise kicked in, with Cairn Energy and miner Xstrata, down 3.7 and 3.2% respectively, among the stand-out losers.
BG Group fell 3.6% as Goldman Sachs downgraded its stance to “neutral” from “buy” on valuation grounds in a Europe-wide review of the energy sector.
BP, which has tumbled nearly 50% since a massive oil spill started in the Gulf of Mexico in April, fell 2.6%.
“The market over-reacted to the China news, we went up on relatively limited news, and we’re going down on limited news,” Steven Bell director at hedge fund GLC said.
He said the upcoming US earnings season has scope to disappoint. “The euro-dollar rate could hurt US companies as they have a large exposure to European markets for their exports.”
The euro has fallen from above $1.50 in December to around $1.23.
The index had gained for eight of the last nine sessions, as fears about sovereign debt around Europe faded to the background, but investors now awaited further clues on corporate and economic health before taking big positions.
Banks braced for budget
Banks fell, with the sector nervous ahead of the impending emergency British budget, the first by the new coalition government, which is expected to impose a levy on the sector. Barclays fell 3.8%, while sector heavyweight HSBC lost 0.1%.
British finance minister George Osborne looked set on Tuesday to also announce big spending cuts and tax rises in what will be the tightest budget in a generation.
As the sovereign debt crisis spreads through Europe, rating agencies have warned even Britain’s triple-A status could be at risk if the 39-year old Chancellor of the Exchequer’s plans to cut the record deficit are found wanting.
Defensive tobacco stocks and pharmaceuticals were among a handful of stocks on positive ground as investors rotated back to stocks perceived as better equipped to weather tougher economic conditions.
British American Tobacco added 0.2%, while AstraZeneca was up 0.1%.
But the strongest performer was Whitbread, up 2.8% as the hotel operator said first quarter sales rose 7.6%, boosted by a strong performance at its hotel chain Premier Inn.
Comment E-mail Print Share
First Published: Tue, Jun 22 2010. 03 58 PM IST