FTSE 100 hits six-week lows 

The FTSE 100 slipped to six-week lows yesterday, breaking below a support level after the European Central Bank signalled it was in no hurry to offer more stimulus to the country’s top trading partner.

Stocks fell after ECB president Mario Draghi said there was no immediate need to introduce negative deposit rates for banks, while the idea of taking asset-backed securities as collateral was a long-term proposition.

“There are really two key points that we are disappointed with.

“The first one is that he feels the economy doesn’t need negative rates right now and secondly there was some hope that he might discuss the option of asset backed securities, and that seems a long way away,” said James Butterfill, equity strategist at Coutts.

The FTSE 100 index, which had been broadly steady before Draghi’s speech, closed down 83.20 points or 1.3 percent at 6,336.11 points - its weakest finish in a month and a half.

The slump, which follows on from a steep retreat on Wednesday, pushed the index through a key technical support area marked by the 100-day moving average at 6,410.49 points and the psychologically key 6,400 level.

“It opens up the way for a bigger correction and you could see the 6,320 level,” said Brenda Kelly, analyst at IG.

Easyjet was one of the biggest fallers, off 4.1 percent, with the sector hit by growing unrest in popular holiday destination Turkey. Some investors also used a monthly trading update by the budget airline to take profit on what has been the fifth biggest gainer on the FTSE 100 over the past three months.

“It wasn’t as strong a monthly update as we expected,” said Alexia Dogani, analyst at Liberum Capital.

“It has done extremely well especially in the past couple of months so any piece of in-line news, people take it as an opportunity to take some profit.”

Activity overall was subdued – at around 90 percent of the 90-day daily average – with many investors unwilling to take positions ahead of today’s US non-farm payrolls report.

With recent market weakness fuelled by concerns that the US Federal Reserve could soon begin to unwind its monetary stimulus, a weak employment report could benefit equities by reducing the chances of such a move, traders and analysts said.

The euro rose to a four-week high against the dollar yesterday and global bond yields rose after the ECB left interest rates unchanged and Draghi said further monetary support was not likely in the near future.

Wall Street traded flat to slightly higher in early trading after a 1.9 per cent drop in the previous two days, which was the S&P 500’s worst two-day slide in more than a month. Uncertainty over the US Federal Reserve’s next move has kept markets on edge.

World equities markets were generally lower, extending a bout of weakness. Investor enthusiasm has dimmed in recent days following lacklustre economic figures and the expectation that major central banks have reached the limit of their stimulus efforts.

The euro rose to a high of $1.3168, its highest since May 9, and against the yen it rose to 130.52 yen.

The dollar was modestly higher against the yen at 99.20, having hit a four-week low of 98.83 yen earlier in the day.

In commodity markets, oil prices gained after a report on a big drop in US oil stocks. Brent crude rose 50 cents to $103.54 a barrel. US oil rose $1.17 to $94.91 per barrel. (Reuters)