LONDON REPORT
BRITAIN’S stock market slumped to its lowest level this year yesterday and looked poised for further falls, with cheap valuations unlikely to lure back investors while concerns persist over Europe’s debt and the health of the global economy.
Heavyweight energy and mining stocks made the biggest dent on the FTSE 100, with another cut in China’s reserve requirement ratio seen as a sign that the key natural resources consumer is still in need of economic stimulus and may need to buy less of everything, from oil to luxury cars.
The FTSE 100 finished the day down 110 points, or 2 per cent at 5,465.52, wiping some £28bn off the index. That was its lowest close since December 2011, after it fell as far as 5,436.69 in intra-day trade.
Bank shares suffered as Greece’s failure to form a government fuelled talk of its possible eventual exit from the Eurozone – an unprecedented move with unpredictable consequences for Europe.
Uncertainty spooked investors, who demanded higher premiums at a Spanish debt auction.
“Clearly what’s going on in Europe is not helpful. Markets don’t like uncertainty,” said Jonathan Jackson, head of equities at Killik & Co. “It’s a global market – something like three quarters of the earnings (on FTSE 100) are from outside the UK.”
He advised buying stocks for the long-term, focusing on companies with attractive yields such as drug maker GlaxoSmithKline and mobile operator Vodafone.