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FTSE stops nine-day rally as banks slide
by Gavin Lumsden on Oct 23, 2013 at 17:05
The UK stock market ended its nine-day rising streak as investors reflected on yesterday’s US jobs report and concerns about banks added to the cautious mood.
The FTSE 100 closed xxx points or 0.3% lower at 6,674, following Asia markets which had been unsettled overnight by a report that China’s banks had trebled bad debt write offs.
European markets also retreated from a five-year high as banks fell after European Central Bank president Mario Draghi promised a tough review of lenders' balance sheets next year.
Weak trading updates from chip maker STMicroelectronics and brewer Heineken also unsettled the FTSEurofirst 300 index, which closed xx points down at 1,280. Italy was the biggest faller with the FTSE MIB tumbling 2.4% to 18,910. France and Germany declined 0.8% and 0.3%.
‘A single comprehensive assessment, uniformly applied to all significant banks, accounting for about 85% of the euro area banking system, is an important step forward for Europe and for the future of the euro area economy,’ Draghi said.
In London Royal Bank of Scotland (RBS.L) was one of the biggest FTSE fallers, down nearly 3% to 350.7p, over concerns to its exposure to the widening US investigation into the mis-selling of mortgage backed bonds. Barclays and Standard Chartered slipped 1.6% and 1.5% respectively.
ARM Holdings (ARM.L) was the biggest faller, sliding another 5% to 956p after the chip designer's trading update yesterday.
Miners Antofagasta (ANTO.L) and Anglo American (AAL.L) slid around 4% at the prospect of China tightening its interest rates.
There was little market reaction to minutes from the Bank of England's monetary policy committee meeting this month showing unanimous support in keeping interest rates at 0.5% and bond purchases at £375 billion, with evidence of a quickening recovery in the economy. The pound traded at $1.6166 to the dollar.
After closing at a five-year high overnight the US stock market also retreated, with the S&P 500 half a percent lower at 1,746.
Most investors judge that the Federal Reserve will postpone any tightening of its stimulus to March at the earliest. The question is whether this is a pause for breath in equity markets or something more significant. The FTSE 100 has risen nearly 13% this year but having rallied from 6,338 on 9 October it is still below its peak of 6.840 on 22 May when Fed chairman Ben Bernanke first spoke about ‘tapering’ the amount of money it pumps into the US economy through monthly asset purchases.
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