The FTSE 100 slipped to fresh five-week lows yesterday, extending last week’s falls on the back of turmoil in emerging markets and steep slumps in oil and gas firm BG Group and Vodafone.
The FTSE closed down 113.08 points, or 1.7 per cent, at 6,550.66, adding to last week’s 2.4 per cent fall, as worries over emerging markets continued to roil global equity markets.
The index is now down three per cent for the year, with the latest pull-back beginning when the index was less than 100 points from all-time peaks.
Britain’s top share index underperformed European peers, with over 80 per cent of its stocks in negative territory, suffering from its substantial global exposure. Analysts said that weakness in emerging market currencies would potentially hurt the profits of companies that report in sterling. “Markets have been chased up and have had a sense of vertigo, which makes the FTSE more vulnerable to the catalyst of an emerging market sell-off,” Mike Ingram, market analyst at BGC Partners, said. “The FTSE could well continue to underperform its European peers the longer these EM worries go on, particularly if we see sterling strength.”
Worries over emerging markets continued to roil global equity markets
BG Group contributed 22.7 points to the index’s drop, suffering from political turmoil in Egypt that Ingram said was typical of concerns surrounding emerging markets.
Its shares fell 13.8 per cent – posting their worst day since 1987 – after the company warned that production this year and next would fall short of expectations, calling its guidance for 2014 “disappointing” due to ongoing problems in Egypt.
Vodafone, the third biggest company in the FTSE 100, fell 3.9 per cent to trim a further 16.8 points off the FTSE after US mobile operator AT&T said it was not planning to take over the British-listed firm, thus putting an end to months of speculation.
“We’d had comments attributed to AT&T suggesting that Vodafone was being looked at... Now that’s been kiboshed, it’s understandable why investors have reacted as they have,” Gerard Lane, equity strategist at Shore Capital, said. The FTSE hit a fresh 5-week low, dropping past technical support at both the 100-day and 200-day moving averages.
The sell-off has seen the index drop from technically overbought conditions, according to the seven-day relative strength indicator (RSI), into oversold territory in less than a week. Technical charts suggest there is scope for future weakness, as the falls started when the index was less than 10 points away from the May 2013 peak and so close to all-time highs.