London Report: FTSE 100 takes breather during corporate lull
THE FTSE 100 ended down 9.1 points yesterday, or 0.1 per cent, at 6,574.34 points, with technical sellers dragging down the index after it failed to break 6,600, a level that has capped its value since last week.
A new failure to break this resistance was seen as a sign of waning appetite for FTSE shares after the index rallied 12 per cent since the start of the year, outpacing a seven per cent rise in the Euro STOXX 50 index.
“Markets are generally paused,” said Lorne Baring, managing director of B Capital, which manages $500m worth of assets and has a small “overweight” position in the FTSE.
“The UK has already been an outperformer this year and it is only natural that it can pause in August.
UK blue chips are down around 0.6 per cent since the start of August, lagging a two per cent rise for the Euro STOXX 50, as investors fret about a possible reduction of British and US monetary stimulus in the coming months.
The markets were awaiting a statement from the Federal Reserve last night, with traders expecting comments on the touchy subject of tapering the world’s biggest economy’s economic stimulus.
With little in the way of corporate news, traders focused on some of the year’s best performers to take some profit.
Airline EasyJet and IAG, which had risen nearly 80 per cent this year, were the top FTSE fallers yesterday, down 3.6 per cent and 3.5 per cent, respectively.
EasyJet traded at 14 times its expected earnings for the next 12 months, its highest multiple since 2009.
“It’s probably at the higher end in terms of valuation,” said Sam Dobson, an analyst at Macquarie Research, recommending German-listed Lufthansa instead.
Insurer Prudential, up 4.1 per cent, helped the FTSE limit its losses, adding 4.8 index points and leading a rally in financial stocks after raising its interim dividend on a 22 per cent rise in first-half operating profits.
Mining group Fresnillo was the top riser, gaining 6.6 per cent to recover some of the losses it sustained last week following weak results.
Gold miner Randgold Resources and metals and oil group Vedanta followed the firm higher, up 2.5 and 1.9 per cent respectively.
Outsourcing group Capita fell 0.9 per cent after Citigroup downgraded the stock from “buy” to “neutral”.
Trading volume was thin, at around 65 per cent of the index’s full-session 90-day average, meaning the size of any move could be magnified by a lack of liquidity in the market.