View the article online at http://citywire.co.uk/money/article/a578984
FTSE gains unravel as 'toxic' news hits the screens
The New Year rally looked to be over as the FTSE 100 slid amid a flurry of warnings, including a forecast that the UK will fall back into recession.
Britain’s FTSE 100 retreated as economists at the Organisation of Economic Cooperation and Development forecast the UK could relapse into a recession and as financials led the market down.
The benchmark UK index of blue-chip shares slid 1.15%, or 67 points, to 5,742 and the Mid-250 index dropped 1.37%, or 159 points, to 11,431. See the FTSE’s performance.
Despite the New Year rally, the index now looks set to reverse much of its gains since the start of the year. The FTSE 100 index began the year at 5,572 points, and rose to take on 394 points, or 7%, peaking at 5,966 in mid-March.
However, since then the index has lost more than half of these gains, and is only 170 points, or 3%, higher than it was at the beginning of 2012.
The financials sector made the biggest losses on the market. Barclays (BARC.L) gave up 10.9p, or 4.5%, to 234.6p; Aviva (AV.L) shed 11.5p, or 3.4%, to 325p; and Royal Bank of Scotland (RBS.L) fell 0.8p, or 2.7%, to 28.6p.
Lloyds (LLOY.L) also dropped 1p, or 2.9%, to 33.4p as doubt was cast over the sale of 632 of its branches to the Co-Operative Group after Peter Mark, the group’s chief executive, said the deal is ‘not a certainty’.
The news came as the Co-Op reported that its full-year pre-tax profits for 2011 slumped 5.8% and profits from its banking arm fell by £1 million to £201 million for the year.
However, HSBC (HSBA.L) offered some hope for the bank, as it announced that it will purchase Lloyds’ UAE assets by the second half of this year.
OECD forecasts UK recession
European markets were downbeat as economists at the OECD forecast that the UK, Germany, France and Italy will enter a technical recession as growth is expected to have shrunk when data for the first quarter is released next month.
Sentiment was also clouded by Standard & Poor's warning Greece might need a further round of debt restructuring and the European Central Bank saying its programme of cheap lending to banks would take months for the money to reach consumers.
Angus Campbell, head of market analysis at Capital Spreads, said: ‘Markets were in full risk-aversion mode today and the FTSE is on track to record its second worst day of the year, and in danger of wiping out the gains it has achieved so far in 2012.
‘A barrage of comments from officials at Standard & Poor's, the ECB and OECD all combined to make a toxic mix of negative comments regarding the outlook for the eurozone and global growth as a whole.’
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- Barclays PLC (BARC.L)
- Aviva PLC (AV.L)
- Royal Bank of Scotland Group PLC (RBS.L)
- Lloyds Banking Group PLC (LLOY.L)
- HSBC Holdings PLC (HSBA.L)
- International Power PLC (IPR.L)
- Bwin.Party Digital Entertainment PLC (BPTY.L)
- Balfour Beatty PLC (BALF.L)
- Firstgroup PLC (FGP.L)
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