Britain’s top share index experienced its largest single-day fall in three months. As growing political uncertainty steadily grows in much of Europe and a string of analyst downgrades ignited a wave of profit winnings.
The mounting popularity of the former premier in Italy and the corruption scandal in Spain buffed concerns regarding the political instability of the region that could possibly undermine the region’s already snail paced progress out of the existing debt crisis.
With the crisis overwhelming Europe, any setback is most likely going to affect Britain, for whom the Eurozone is the top trade partner and whose corporate masters have already taken much of the hits and problems in Southern Europe.
Together with the hefty seven per cent rally in Britain’s FTSE 100 so far this year along with the strong performance fuelled by new-month money this week alerted some investors to cash in their profit. Much of the day’s coverage was more profit taking which has been happening for a while. According to the head of equity trading at Goodbody Stockbrokers, the over purchase has resulted in a few trades that came in looking for a good price with big moves.
Moreover, there is a lot of money just waiting on the sidelines wherein the sensitivity of clients is more pronounced with fear of the market going up than going down.
The UK blue chip index closed down at 100.40 points or 1.6 % at 6,246.84 points falling back after posting its highest finish in 5 years.
The banking district which is most exposed to the Eurozone trepidation through their holdings of sovereign debt was one of the worst performers so far with just down to 2.2 % as investors reserved profits on a rally of over 10 % this year.
Traders speculated that the Eurozone anxiety which pushed the yields on the 10-year Spanish and Italian government bonds to its peak this year wherein the main driver for the UK sector overshadowed by plans of the British chancellor for a new policy to break up banks that failed to repel retail operations from precarious investments.
Apparently Eurozone politics didn’t have anything remarkable in their actions that helped the overall situation and the yield spikes in debt ridden Spain and Italy’s 10 year bonds is perhaps the largest driving force behind the present selling price according to the head sales trader at CMC Markets.
Top contending energy companies also experienced heavy losses as oil prices retreated due to geopolitical strain in the Middle East. The recent drop pushed the index below slight resistance at the 10-day moving average of just about 6, 268.80, but was not enough to cast a shadow over the wider up-trend that has been fully intact since last year.