Stock Indices slides 1.2% across Europe in early trade as risk aversion escalates
City Index August 3, 2011 8:35 PM
<p>Stocks across Europe slid heavily on Wednesday, escalating an already bearish week as traders reacted to a dreadful session in the US last night and […]</p>
Stocks across Europe slid heavily on Wednesday, escalating an already bearish week as traders reacted to a dreadful session in the US last night and 2% falls in the Nikkei before the start of the European session on concerns over sovereign debt and a slowdown in the global economy.
The FTSE 100 opened heavily lower as a result, trading as low as 5635, down 83 points, with most of the energy behind today’s losses emanating out of the heavyweight mining, oil and banking sectors. It is important to note however that some 17 points were knocked off the FTSE 100 today, due to stocks such as BP, Royal Dutch Shell and GlaxoSmithKline going ex-dividend.
The FTSE Volatility Index, a gauge of market fear and pessimism, hit a new four-and-a-half-month high this morning, hitting levels not seen since the Japanese earthquake and tsunami, emphasising the escalation in investor tensions having seen dealing screens filled with red in the US overnight and Asia this morning.
Safe havens seeked
Traders continue to recycle funds out of risky asset classes such as mining, oil and banking stocks, and move these funds into typical safe haven asset plays such as gold, which subsequently raced even higher to trade at a new all-time record high of $1672.65. The price of oil and copper also tracked the broader negative sentiment lower, losing 0.5% on the day. The only stock sector on the FTSE 350 to gain today is the utilities sector.
European bonds for peripheral nations also saw bond yields continue to rise as fears grew over potential contagion of sovereign debt with both Italian and Spanish 10-year bond yields remaining stubbornly above the 6% mark. Italian and Spanish 10-year bond yield spreads over German Bunds widened further on the day also.
Weak data could see a revisit of March lows
From a technical perspective, the FTSE 100 has immediately broken below support levels of 5740 and 5697 over the last 24 hours. Should the UK Index fail to retrace back above the 5697 level, it is conceivable that we may see a revisit of March lows of 5591 by the end of the week, particularly if US economic data continues to sharply disappoint.
Standard Chartered beats consensus for half-year profits
Standard Chartered bucked the broader negative stock trend today to trade higher by 1.5%, outperforming a 0.5% fall in the FTSE 350 banking sector, after beating market expectations with a 17% rise in half-year pre-tax profits. Pre-Tax profits came in at $3.64 billion, much higher than market consensus estimates of around $3.47 billion.
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