Citywire printed articles sponsored by:
View the article online at http://citywire.co.uk/wealth-manager/article/a588344
FTSE slips as JP Morgan blunder frays nerves
by Caelainn Barr on May 11, 2012 at 09:34
Britain’s markets slipped on Friday morning as US bank JP Morgan posted a shock $2 billion loss, unnerving investors and sparking a sell-off of risky assets.
The FTSE 100 fell 0.71%, or 40 points, to 5,504 and the Mid-250 index lost 0.38%, or 43 points, to 10,901. See the FTSE’s performance and the index’s top risers and fallers.
International Consolidated Airlines (IAG.L) shed 3.4p, or 2%, to 159.5p after it made an operating loss of £200 million in the first three months of the year owing to rising fuel costs and economic headwinds in Europe.
Sales increased 7.8% to £3.14 billion in the quarter, but setbacks and strikes at its Spanish airline, Iberia, saw the division post a £136 million loss. The group is forecast to break even for the full year.
JP Morgan loss weighs on markets
Further evidence that growth in China may be slowing emerged as the country’s consumer price index, which measures inflation, reduced to 3.4% in April from 3.6% the year before.
Asian markets slid and European banking stocks were badly hit as JP Morgan revealed that it lost $2 billion in a failed hedging strategy that was designed to help protect the bank from risks.
The losses are linked to a trader nicknamed the ‘London Whale’ who built up a position that hedge funds bet against.
Jordan Lambert, trader at Spreadex, said of the losses: ‘This has dragged down the entire US banking sector with it and permeated to the wider market as investors and spread bettors assess the possible systemic risk adding another layer of caution to the fragile trading environment.
‘When such shocks occur it is wise to err on the side of caution, and consider whether it is a possible "tip of the iceberg" scenario, especially when one contemplates the interconnectedness of the banking system.’
In the eurozone Greek politicians are still struggling to form a coalition, which could lead to a fresh round of elections in mid-June.
News sponsored by:
Citywire 10k run: the 28 teams & 173 runners set to do battle
We reveal the teams and runners who have committed to take part in our annual fundraiser at Regent's Park later this month.
Today's top headlines
More about this:
Look up the shares
- International Consolidated Airlines Group SA (ICAG.L)
- Barclays PLC (BARC.L)
- Bhp Billiton PLC (BLT.L)
- Eurasian Natural Resources Corp PLC (ENRC.L)
- Rio Tinto PLC (RIO.L)
- Centrica PLC (CNA.L)
- Thomas Cook Group PLC (TCG.L)
More from us
Aberdeen Live supplement: Fundamentals point to ongoing flows and solid returns from EMD
After a record year for inflows and market-leading performance in 2012, emerging market debt has taken a large step towards the mainstream. Our recent debate covers the outlook for the asset class this year and where opportunities can be found.