London’s leading shares suffered substantial losses on Thursday after credit rating agency Standard & Poor’s cut its outlook on the UK to 'negative' from 'stable,' unnerving investors and tripping a wide-ranging equity sell-off. Falls on Wall Street in British afternoon deals were a further weight on the UK blue-chip index.
The FTSE 100 index closed down 2.8%, having dropped 122.9 points to 4,345.5—taking it pretty much back to its Monday morning starting point, while the FTSE 250 saw 2.9% taken off its market value. The mid-cap index ended the session 221.6 points lighter at 7,512.4. In the US, the Dow Jones Industrial Average, the S&P 500 and the NASDAQ Composite had all dropped between 1.5% and 2.0% by the UK close.
S&P’s outlook downgrade was not only a concern in itself but also raised further fears that the agency could be looking to downgrade the nation’s credit rating.
Investors were also jumpy ahead of tomorrow’s key GDP figures release, which is likely to determine whether money is left on the table for the long bank holiday weekend or if investors opt to take profits.
Having unveiled full-year numbers that were broadly in line with analyst expectations, some were surprised to see Cable & Wireless among the worst blue-chip performers. The telecoms company’s share price was hit by market talk of directors selling stakes, undermining confidence in the group’s future. However, as analysts at Charles Stanley pointed out, the telco’s private equity style incentivised pay scheme means that a portion of all directors’ vesting shares were automatically sold to pay the associated income tax and National Insurance.
“If this is the reason for the price fall, it looks to have been overdone,” the broker said, although it also noted that “on a down day for the market as a whole, it may be understandable that there was no immediate buying to push the share price back up.” Cable & Wireless closed down 9.6% at 142p.
Miners also featured heavily on the casualty list. Kazakhmys, Eurasian Natural Resources, Rio Tinto, Antofagasta and BHP Billiton were among the ten worst performers on Thursday, shedding 6.3%-9.6% apiece as investors switched back into selling mode after the previous session’s rally.
News that British Land’s portfolio valuation dropped by £3.2 billion over the last year, reducing its net asset value per share by 64%, wiped 8.2% off the real estate investment trust’s shares to 380p. Peers Hammerson, Liberty International and Land Securities each lost 5.8%-6.8% in sympathy.
And banks continued yesterday’s decline, hurt by S&P’s unsettling of investor confidence. Royal Bank of Scotland, Lloyds Banking Group, Standard Chartered, HSBC and Barclays eased between 3.1% and 5.9%.
With the UK market representing a sea of red by close of play, of more interest perhaps is which shares managed to make headway. The number of blue-chip gainers could be counted on one hand, among them defensive plays AstraZeneca and GlaxoSmithKline, up 0.4% at 2,646p and 0.5% at 1,063.5p, respectively. Astra today announced a minor victory for its Pulmicort Respules drug following the preliminary injunction barring Apotex from launching a generic copy.
The other two risers were Tullow Oil, 3.6% higher at 980p, and Lonmin, ahead by 1.0% at 1,279p.
