11th Feb 2016 17:00
LONDON (Alliance News) - Fears for the global economy and another slide in oil prices sent investors flocking to safe-haven assets Thursday, sending stocks lower around the world.
In London, the FTSE 100 index closed down 2.4% at 5,536.97, along the way touching its lowest level since July 2012 at 5,499.51. The mid-cap FTSE 250 ended down 2.2% at 15,178.80 and the AIM All-Share down 1.5% at 663.90.
In Europe, the French CAC 40 closed down 4.1%, while the DAX 30 ended down 2.9%. Earlier in Asia, the Hang Seng closed down 3.9% in Hong Kong's first session of the week following the Chinese New Year holiday which kept the Shanghai market shut. Tokyo also was closed for holiday Thursday.
On Wall Street at the London close, the Dow Jones Industrial Average traded down 2.4%, the S&P 500 down 2.0% and the Nasdaq Composite down 1.6%.
"Today's stock market falls symbolise a profound loss of confidence from investors in the global markets," said Colin Morton, portfolio manager at Franklin Templeton.
"The UK is no safe haven at the moment with the FTSE 100 too dependent on those mining and banking stocks which rely too much on a strong global economy," Morton added.
Banks and other financial stocks were again at the heart of the selling Thursday, having received brief respite on Wednesday. The weight of negative sentiment about the global economy meant life insurer and asset manager Prudential closed as the worst FTSE 100 performer, down 7.4%, while emerging markets-focused fund manager Aberdeen Asset Management also ended down 7.4% and lender Barclays fell 7.0%.
Despite the widespread selling, Franklin Templeton's Morton said a repeat of the financial crisis of 2008 is not on the cards.
"We mustn't confuse the current situation with 2008. The banks haven't been on silly lending sprees and are less leveraged than they were. Given the banks' relative opaqueness they will struggle until confidence returns, but until then we understand the market concerns," Morton said.
Joshua Mahony, market analyst at IG, also does not believe conditions are the same as eight years ago. He said people are looking at the losses in the stock market as an indicator of an oncoming recession, but these losses are occurring at a time when the economy and jobs have been growing relatively robustly in the US.
"There was a palpable feeling that markets overrun themselves in the past when bursting to new all-time highs off the back of monetary policy stimulus. However, in the face of a monetary policy withdrawal, it seems the confidence that underpinned investor sentiment is nowhere to be seen. This is not another credit crisis, nor a dot-com crash," Mahony said.
"However, it is clear that we are seeing the biggest crisis of confidence since the height of the 2007/2008 crisis," he added.
That lack of confidence triggered a surge in demand for the supposed safe haven of gold. The metal reached its highest level in a year at USD1,256.30 an ounce, and at the London equities close it was quoted at USD1,252.73 an ounce, much higher than the price seen at the same time on Wednesday of USD1,191.26.
The rise in the price of gold supported shares in London-listed gold miners. Fresnillo, up 5.4%, and Randgold Resources, up 7.5%, ended as the best blue-chip performers, while Centamin, up 6.0% and Acacia Mining, up 4.9%, were top mid-cap gainers.
While gold moved higher, oil slipped backward. US benchmark West Texas Intermediate hit its lowest level since 2003 at USD26.21 a barrel and was trading near those levels at the London equities close. Brent crude also was lower, trading at USD30.09 a barrel, compared to USD30.76 late Wednesday.
In UK corporate news, DCC ended as one of the few FTSE 100 gainers, up 2.9%.
The distribution and logistics company reiterated expectations that it will see operating profit and adjusted earnings per share "very significantly ahead" of the previous year and in line with market expectations for its current year to end-March. In the year to end-March 2015, DCC reported an operating profit of GBP221.7 million, and adjusted earnings per share of 202.2 pence.
Imperial Brands closed up 2.0% after it reported a rise in net revenue in the first quarter of its financial year and said it is on track to meet its full-year outlook.
The company, which recently changed its name from Imperial Tobacco, said tobacco net revenue at constant currencies was up 17% in the three months ended December 31, in line with its guidance, and up 10% on a reported basis, supported by a GBP226 million contribution from ITG Brands in the USA. However, total tobacco volume fell 3.0%, which it said was largely due to the turmoil in Iraq and Syria.
Informa closed up 3.8%, one of the biggest gainers in the FTSE 250. The events and business publishing company said it expects to see further earnings and cash flow growth in 2016 as it undertakes the third and final year of its 'Growth Acceleration Plan', and reported a swing to a profit for 2015.
The company posted a pretax profit of GBP219.7 million for 2015, swung from a pretax loss of GBP31.2 million in 2014, as a result of a rise in revenue to GBP1.21 billion from GBP1.14 billion and lower exceptional costs.
Interserve closed down 14% after Liberum downgraded its rating on the stock to Hold from Buy, saying it expects the construction services group's full-year results to be hit by weak trading in the Middle East. The company will report full-year results on February 24.
At the London close, US Federal Reserve Chair Janet Yellen was answering questions from the US Senate Banking Committee in the final part of her semi-annual testimony on Capital Hill. The pound traded the dollar at USD1.4444. compared to USD1.4480 late Wednesday. The euro traded at USD1.1354 versus USD1.1211.
In the economic calendar Friday, there are inflation and GDP data from Germany at 0700 GMT before the European equity open. Eurozone GDP is at 0900 GMT before industrial data from the single currency union at 1000 GMT. US retail sales and import and export price indexes are at 1330 GMT, while the Reuters/Michigan Consumer Sentiment Index and business inventories both at 1500 GMT.
In the UK corporate calendar, jet engine and power turbine maker Rolls-Royce Holdings reports full-year results, while payments company Monitise and City of London Investment Trust both report full-year results. Specialist finance provider S&U and electronics supplier Acal issue trading statements.
By Neil Thakrar; [email protected]; @NeilThakrar1
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