UK stocks closing: Britain’s top share index dropped in thin volume on Tuesday, hit by falls for several heavyweight banks and miners, and was expected to remain technically rangebound in the near term.
While some in the market had hoped U.S. Federal Reserve Chairman Ben Bernanke would signal it was closer to launching a fresh round of monetary stimulus, when he spoke to politicians in Congress, he again just reiterated their willingness to act.
Concerns about growth and its impact on corporate earnings, as well as the long-running debt crisis in Europe, continued to keep many on the sidelines and once again volumes on the FTSE 100 were light, at two thirds of the 90-day daily average.
Volumes are lower than where they have been but that’s partly a reflection of the low risk appetite, people have become risk averse they don’t want to take a defensive portfolio or a pro-cyclical portfolio, said Gerard Lane a strategist at Shore Capital.
By the close, the FTSE 100 was down 0.6 percent, or 33.34 points, at 5,629.09 points.
Miners, were once again among the worst performers after weak sales from Rio Tinto, down 2.3 percent, spurred fears about a slowdown in demand by major metals consumer China.
Other heavyweight resources stocks also dipped into the red, including Anglo American, down 1.1 percent, although some said recent falls in the sector could be seen as a buying opportunity.
Strategists at BNP Paribas said while the broader STOXX Europe 600 Basic Resources sector had been hit by growth fears and move away from riskier sectors, some, including Xstrata, may have been oversold.
They have fallen by around the same amount as the sector, but the downgrades of 2013e consensus earnings over the past 3 months have been more modest, they wrote in a note.
They also backed a broader rotation out of some heavily bought defensive sectors and into relatively cheap cyclical sectors ahead of the earnings season.
A change in the current investor positioning out of overweight consumer discretionary stocks into value cyclicals is looking increasingly likely as we head into Q2 earnings season, particularly given high expectation implied by current valuations, they wrote.
We identify some attractive upside plays in value cyclicals, and stock replacement strategies in overbought, overvalued and overbullish defensives stocks, given current skew and implied volatility levels.
HSBC A DRAG
Taking most points off the index and driving the banking sector into the red was HSBC, hit by a U.S. Senate report on the company which called the bank’s culture pervasively polluted.
HSBC Holdings was down 1.7 percent by the close to shave 7 points off the index.
(The) most important consequence is that the bank is now under the microscope … at a very bad time where banks are used as scapegoats by politicians globally, analysts at Italian bank Mediobanca said in a research note, adding that they expect HSBC to face a $1 billion fine as well.
Leading fallers for the fourth straight day, however, was security firm G4S, down 5.7 percent in volume nearly six and a half times its 90-day average, as it took a fresh hit from its Olympics contract troubles.
Since the news broke, demand to borrow the company’s stock by short-sellers had rocketed.
Shares of G4S on loan have doubled in the past week as traders seek shares to fulfil short sales of the stock and take advantage of the falling share price, David Lewis, senior vice president at securities lending firm Astec Analytics.