FTSE 100’s resource stocks lead heavy selling

Indonesia stock info - FTSE 100’s resource stocks lead heavy selling ; London equities fell fast on Wednesday, as growing concern about the health of the global economy continued to take a heavy toll on riskier assets across the world’s markets.

Resource stocks were in the frontline of the selling as traders feared a series of weak economic data out of the US could herald deeper problems with the economic expansion on which the sector depends for demand. Overall, The FTSE 100 fell 1.1 per cent to 5,650.40, a loss of 67 points.

Cairn Energy fell by the widest margin in the sector, down 3.7 per cent to 339½p. Royal Dutch Shell lost 2.5 per cent to £21.60, while BP was 0.9 per cent weaker at 443p. Nymex WTI crude prices fell 0.6 per cent to $93.21.

News overnight that rating agency Moody's placed a negative outlook on the US’s AAA credit rating after the recent sovereign borrowing limit dispute added to the wider unease. Heavy overnight losses on Wall Street and in Asia set a fractious tone leading into the start of European trade, leaving euorozone banks vulnerable to the outbreak of heavy selling.

Italian financial stocks traded for minutes before being suspended at the bottom of their daily trading limits. Overall, Milan’s benchmark, the FTSE MIB, fell 0.9 per cent to 17,110.19. A profit warning from French Bank Société Générale due to its exposure to Greek debt sent its shares down by their daily limit before they too were suspended. Paris’ CAC 40 lost 1 per cent to 3,488.17.

There were losses among London’s banks, especially those seen as more vulnerable to the travails of the eurozone. Royal Bank of Scotland fell 1.9 per cent to 32.9p and Lloyds Banking Group lost 0.5 per cent to 39.7p. But there were further signs of resilience in parts of the sector after Tuesday’s stoicism in the face of heavy selling of continental European banks. Barclays stayed flat at 216.9p after well-received earnings over the previous session.

Standard Chartered, the UK bank focused on emerging Asian markets, managed to make solid gains after it reported 17 per cent increase in first-half pre-tax profit of $3.64bn. Shares in the company rose 2 per cent to £15.83, one of only 15 FTSE 100 constituents to make gains in early trade.

But analysts were beginning to voice hope that the market would start to find some support even as it set course for the fourth consecutive session of losses after closing at a five-week low after the previous session.

“From a contrarian point of view, it looks like we’re getting close to a short-term bottom; it looks like the market has just reacted too negatively to the recent weak US data,” said Ben Potter, strategist at IG Markets.

“The stock market is a leading indicator so all these headlines, be it in newspapers or on the news tonight are already factored into current prices. I think we’re getting to a point where expectations are just getting too bearish; it’s at these extreme points in sentiment where market reversals usually occur, with ‘less bad’ news perhaps the catalyst. With markets in the US down seven or eight days consecutively, they’re ripe for a short-covering rally.”


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