Afternoon rally helps the FTSE 100 to close flat

An afternoon rally in European equities, which tracked similar moves across the Atlantic in US trading saw UK equities recover from earlier losses to close in flat territory.

The FTSE 100 closed at 5792, down 1pt, having traded as low as 5764 by late morning.

We have the German constitutional court expected to ratify the European Stability Mechanism (ESM) tomorrow whilst the FOMC also starts a two day meeting tomorrow which culminates on Thursday and there is a chance the Fed could announce additional stimulus measures.

It is these two elements which have kept traders somewhat on edge today, particularly after the Mario Draghi induced rally at the end of last week having announced Outright Monetary Transactions (OMT). Therefore, it’s no surprise to see the market swing between losses and gains but perhaps the edginess dictates that we should not read too much into the turnaround in trading in the afternoon session.

From a sector perspective it is financial stocks and tobacco firms that have contributed to much of the turnaround. The FTSE 350 banks and tobacco sector closed higher by 0.6% and 1.65 respectively, helping to counter some drag on the FTSE from a weaker mining sector, which fell 0.75% on the day.

Burberry shares slump 20% on profit warning
Burberry shares fell the most in trading, losing a whopping 20% after shocking shareholders with a profit warning. The luxury retailer which relies on demand from emerging markets such as China and has thus far bucked the trend of consumer spending headwinds affecting mainstream European retailers, said that sales did not grow at all for stores open more than a year, having seen sales growth of 6% last quarter, which is some slowdown.

As a result of this slowdown, the firm said that profits would be at the bottom end of market forecasts. A failure to clarify where the slowdown was weighted in gave rise to speculation in the markets that the suffering was broadly felt across multiple markets. Had this not been the case, Burberry would likely announce which market was being affected the most to try and marginalise the effect to one area.

Chart: Burberry shares performance