FTSE loses 0.7% despite strong demand at French bond auction

<p>The FTSE 100 lost 0.8% on Thursday as traders continued to downsize positions in riskier stocks despite a large French bond auction seeing strong demand. […]</p>

The FTSE 100 lost 0.8% on Thursday as traders continued to downsize positions in riskier stocks despite a large French bond auction seeing strong demand.

By late morning financials and mining firms were the key drags on the FTSE 100, as weakness in European banks continued amidst concerns over exposure to sovereign debt and fears that capital raising efforts may see weak demand, forcing asset sales.

The French bond auction progressed relatively smoothly, with the country able to raise €7.96 billion, close to the €8 billion maximum aimed, with strong demand helping to show that fears of a potential loss of the country’s top notch credit rating may not be as entrenched in the market as headlines suggest. That said, a move higher in the yields demanded does show deterioration in sentiment, heightened by exposures to sovereign debt by key French banks.

Euro continues to trade bearishly
The euro saw yet more strong weakness against both the pound sterling and the US dollar, where it hit a new 16-month low of $1.2828. It’s a significant low for the euro. Since May last year the single currency has been on a downward spiral seeing lower lows and lower highs, a strong bearish movement. The uncertainty over sovereign debt situation remains, alongside fears that key nations such as France could soon lose its Triple ‘A’ credit rating is a constant drag on the euro’s prospects. We are now at levels whereby the euro must find some support soon or 1.26 could be achieved sooner rather than later and a break below 1.20 could become a real possibility.

London risers and fallers
In London trade, chip maker ARM Holdings was the top gainer, with the firm’s share prices rising over 3% after investment bank UBS placed a short term ‘buy’ signal on the firm’s shares. The bank said that it expects the company’s fourth quarter results, due out on January 31, to beat expectations. ICAP shares were the worst performers, losing 3% after the inter-dealer broker peer Tullett Prebon warned of a difficult trading environment and UBS issued a cautious note on the sector in general.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.