Fed disappointment knocks Britain’s FTSE lower
LONDON July 12 — Britain's top share index fell on Thursday, led by commodity stocks and banks, due to disappointment over the lack of a clear signal from the U.S. Federal Reserve that more moves are in the pipeline to bolster growth.
Minutes from last month's Fed meeting, published late on Wednesday, showed the majority of policymakers are unconvinced that further monetary stimulus is needed for the world's biggest economy. The outlook will have to worsen further for any such consensus to build, they showed.
"We would anticipate that any major further stimulus may wait until after the election in November, purely from a viewpoint that the Fed will want to appear politically impartial," said Shore Capital strategist Gerard Lane in a note.
At 0743 GMT, the FTSE 100 index was down 42.81 points, or 0.8 per cent, at 5,621.67, having ended the session barely changed in low volumes on Wednesday.
Early trading volumes were again thin, at 6 per cent of the 90-day daily average.
"The thin trading conditions make the index ripe for volatile moves and perhaps an expanded range," said James A. Hyerczyk, technical analyst at Autochartist.
"With a bias developing to the downside, FTSE traders should watch for an attempt to take out the two bottoms at 5,622.30 and 5,610.70. The could trigger an acceleration into another retracement zone at 5,571.05 to 5,534.16," Hyerczyk added.
Weak miners were the main drag on blue chip sentiment as copper prices edged lower, falling for a fifth session in seven on the back of the Fed minutes and caution ahead of China growth data, to be released on Friday.
Rio Tinto was the biggest sector casualty, down 3.0 per cent as the Anglo-Australian miner said its Chief Financial Officer Guy Elliott would retire at the end of next year, and that the company would be creating a new position to oversee the group's strategy.
Fund manager Ashmore Group was the biggest individual blue chip faller, dropping 5.8 per cent after reporting a fall in the amount of money it manages in its fourth quarter. Weak performance and the exit of clients saw it lose more than a fifth of its equity assets.
Mid-cap Aegis Group soared 45 per cent as Japan's Dentsu Inc agreed to buy the British marketing group for 3.2 billion pounds (US$5 billion), or 240 pence a share. That will combine the Japanese firm's strong presence in Asia with the British group's footprint in Europe and digital services.
"Dentsu's proposed agreed bid at 240 pence for Aegis looks a very full price in our view and we think rival agencies are unlikely to counter bid," Investec Securities said in a note.
The marketing sector consolidation gave a boost to blue chip advertising giant WPP Group, up 0.8 per cent, and to broadcasters ITV and BSkyB, ahead 1.0 per cent and 0.7 per cent respectively.
British companies, however, cut their marketing budgets for the first time in a year in the second quarter, as pessimism about the economy regained the upper hand, an IPA Bellwether survey said on Thursday.
Data-wise, markets will eye U.S. weekly jobless claims, due at 1230 GMT together with June U.S. import and export prices. June's U.S. Federal Budget is not released until 1800 GMT, after the London close. — Reuters