Britain’s FTSE fell on Tuesday extending earlier losses, weighed by worries the European Central Bank may not deliver enough stimulus this week to tackle a global economic slowdown, as comments by German policymakers further dented expectations.
At the close, the FTSE 100 was down 45.97 points, or 0.8 percent, at 5,647.66, also weighed by weak results from BP and, ending, however, the month up 2 percent.
Volume was once again weak at 73 percent of its 90-day daily average, with many investors keeping to the sidelines ahead of central bank policy announcements.
Germany’s finance ministry reiterated its view on Tuesday that there is no need to grant a banking license to the European Stability Mechanism, the euro zone’s new bailout fund. A banking license would allow the ESM to borrow cash from the ECB and purchase bonds from indebted countries.
The news halted the FTSE’s three-day winning rally triggered by ECB President Mario Draghi’s pledge last week to do whatever it takes to protect the euro, which fuelled expectations the bank will resume buying bonds to ease soaring Spanish and Italian borrowing costs.
The German comments raised some questions in investors’ minds about whether we are going to get anything conclusive from the ECB on Thursday, or just a discussion on the problems the euro zone is facing, said Darren Winder, a strategist at Oriel Securities.
The real question is: is the ECB going to be buying Spanish government bonds or not, and it is not at all clear at the moment, he added.
Banks were the worst performing sector, halting a four-day winning rally and taking a combined 11 points off the FTSE, as poor results from European peers UBS and BBVA capped momentum in the sector.
The market is waiting for action and we are just not getting any action and at the end of the day investors will throw their hands up in the air and head off to risk-free assets and Europe will suffer, said David Battersby, an investment manager at Redmayne-Bentley.
BP WEAK
Oil company BP Plc was down 4.2 percent, after it took a $5 billion charge in its second quarter results, struggling under the weight of litigation over the 2010 U.S. Gulf oil spill and a recent row with its Russian partners.
The British heavyweight was the biggest drag on the FTSE shaving around 14 points off the index, while trading in high volume of almost twice its 90-day daily average.
Ireland-based building materials group CRH, however, became the top FTSE 100 loser after dropping 5.4 percent, reversing earlier gains, as results from rival HeidelbergCement stressed problems in several of CRH’s key markets.
