Choppy trading session sees FTSE fall 0.5%; defensives sought

<p>Low volumes in today’s trading session, with many investors taking an early leave of absence from the markets for the Christmas break, meant that trading […]</p>

Low volumes in today’s trading session, with many investors taking an early leave of absence from the markets for the Christmas break, meant that trading was particularly choppy, with late weakness triggering a 0.5% decline in the FTSE 100.

Other than the late sell off, it’s been a very quiet trading session, with little investor activity apart from those traders looking to recycle investments out of heavyweight and riskier mining and financial stocks into defensive stock sectors such as pharmaceutical and tobacco firms.

One gets the feeling this may well be the tone to trading for the next few weeks as traders pay less and less attention to their dealing screens and more attention to their Christmas shopping lists.

From a sector perspective, it is the three heavyweight stock sectors; banks, miners and oil firms that are providing much of the drag on the FTSE 100, whilst the pharmaceutical and tobacco FTSE 350 sectors gained 0.7% and 0.4% on the day, emphasising the defensive flow of funds in today’s markets.

The last hour of trading saw the FTSE 100 fall over 1% from its daily highs and this fall came as ECB chief Mario Draghi addressed the European Parliament. Whilst the ECB President said nothing of note that investors had not heard before, there was again no proclamations of support for sovereign nations and their debt markets. To that end there was some degree of disappointment from the market.

The release of the ECB’s financial stability review also highlighted that risks had significantly increased and pointed towards the potential for the re-emergence of a global recession and a new credit crunch. The review was starkly negative in tone and will do little to inspire much confidence going into the New Year.

HMV shares hit new all-time low after another warning
HMV shares hit a new all-time low of below 3p today after the struggling retailer said that it may not survive in its current structure after posting a deeper than expected loss for the first half of the year. Shares closed down by nearly 30% on the day as a result of the warning and deeper loss. The retailer has net debts of £163.7 million and a current market cap of just £15.1 million, meaning that it could be forced to sell off assets such as HMV Live.

The sharp fall from grace of the long standing UK retailer from a share price of 280p just six years ago to below 3p today is immensely sad to see and whilst the writing had been on the wall for the firm for the last few years, the move in share price indicates that investors do not believe the firm can survive in its current state and time has almost run out.

There is every possibility that a bad Christmas at HMV could tip the firm too far over the edge.

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