London nears fresh fall into bear territory
The City is bracing itself for possible entry into bear market territory this week, after the FTSE fell 41.7 points to 5434.9 by midday on Friday, and saw the psychologically-important 5,400 level broken in the final hour.
With the words “negative”, “topsy-turvy”, and “recession” dominating reports on the market at the end of last week, Tim Hughes, head of sales trading at spread betting firm IG Index, says that a current lack of investor confidence leaves them likely to “abandon ship at any hint of bad news”. Thus making “thin-skinned banks ever susceptible to negative sentiment”.
Deutsche Bank’s chief economist George Buckley said that while the market has not reached critical points yet, the bank is erring on the side of caution: “we have revised down our view on growth, with the economy skirting dangerously close to recession”. Buckley added, however, that the total outcome of the current situation is, as yet, unclear: as though “ongoing housing correction should then further negatively impact on consumption, the importance of spill over effects is uncertain”.
Few analysts have specifically mentioned the likelihood of the FTSE entering bear market conditions, though their overall sentiment is negative. Many feel that the situation is likely to get worse before it gets better.
In a research note, Capital Economics said: “News released over the past week has made it much more likely that the UK economy will enter a recession.”