FTSE closes with small losses after another volatile day

The FTSE 100 closed with small losses after another volatile day that saw the FTSE Volatility Index soar 15%, adding to yesterday’s 17% climb.

Pardon the cliché but today’s markets have very much been a game of two halves. The morning session saw traders fixated on unrest and instability in Libya, triggering 8% rallies in the price of crude oil and therefore sapping investor appetite for risk. But in what has been a growing trend of late, investors have been enticed back into the market by any significant fall in equity prices and used the weakness of the last few days as opportunities to pick up banks and miners at lower prices. The buying demand received a boost in the late afternoon when US consumer confidence surprised the market to rise to its highest level for almost three years.

It’s been quite a session and the FTSE 100 has swung violently from 88 points down on the day to close just over 10 points weaker, a swing of nearly 150 points creating several opportunities for swing traders.

Today’s recovery in the FTSE 100 boosts optimism that traders are still eager to purchase stocks and that the bias remains to the upside.

From a sector perspective, it is defence and airline stocks that have suffered the brunt of selling today. Defence firm BAE Systems was the worst performing equity on the FTSE 100 today, falling 4.3% as traders reacted to Defence Secretary Liam Fox’s charge to stop government overspending whilst a parliamentary watchdog said that Britain would need to cancel more defence contracts. Traders had feared that budget cuts could potentially hamper business for defence firms and today’s stance from Liam Fox seems to have escalated those fears.
Airliners have been hit particularly hard purely on the back of the recent spike in crude oil prices. This is a somewhat expected reaction from traders who will naturally fear that the spike in crude oil prices will escalate carrier costs and pressurise profit margins.