FTSE Nearing 10-Week Low

THURSDAY MARKET UPDATE: FTSE continues declining amid worries over the US, Europe and the Middle East, while BP reaches a £2.8 billion settlement

Alanna Petroff 15 November, 2012 | 5:45PM
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UK markets continued their downward trajectory on Thursday, with the FTSE 100 nearing a ten-week low. The benchmark index is now closed at 5,678, after falling by 0.8%. The FTSE 250 index also declined by 0.3% to close the trading day at 11,684.

The major laggard on the FTSE 100 on Thursday was Pennon (PNN). The UK water and sewage company saw its shares tank by 6% in the middle of the day after it released an afternoon trading update reporting troubles at its Viridor business division

Oil giant BP (BP.) was featured prominently in the headlines after it reached a settlement with the US Department of Justice over its Deepwater Horizon oil spill in the Gulf of Mexico. The company issued a statement saying the total settlement for the spill will cost £2.8 billion ($4.5 billion). It is also pleading guilty to 14 criminal charges. Of those 14, there were 11 felony counts for misconduct and neglect related to the death of 11 of its workers on the now-infamous oil rig.

In terms of the overall market mood on Thursday, investors were clearly in "risk-off" mode.

"Concerns over the US budget, continuing eurozone uncertainty and the potential escalation of conflict between Israel and Hamas encouraged risk aversion from investors," explained market analyst Fiona Cincotta from City Index.

In addition to US and eurozone concerns, "Middle Eastern tensions gave investors yet another reason to move out of riskier assets such as equities. With heightened tensions between Israel and Hamas there is a real concern of a wider war in the region," said Cincotta.

Worse-than-expected UK retail sales numbers for October also weighed on investor confidence. The latest data from the Office for National Statistics showed sales declined between September and October.

"Looking at the monthly picture--October 2012 compared with September 2012--both the quantity of goods bought and the amount spent decreased following increases between August and September," stated the ONS report.

Analysts were quick to express dismay over the numbers: 

"The retail sales data offers early warning of potentially little or no contribution from household spending for GDP this quarter, in line with the Bank of England’s outlook for a probable dip in the economy through year-end," said Gerard Lane, an analyst at Shore Capital.


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Alanna Petroff

Alanna Petroff  is a financial journalist with Morningstar UK.