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LONDON (Alliance News) - The FTSE 100 closed down for the first time in eight days Tuesday, retreating from Monday's 14-year closing high, as renewed worries about Chinese economic growth weighed on stock markets in Asia and Europe.
The Asian session saw the Hang Seng close down 0.3% and the Shanghai Composite index close down more than 2% after China's central bank again moved to tighten liquidity in the money markets by draining another 100 billion yuan via bond repurchases. Chinese shares fell sharply, led by property developers, as investors worried that tighter lending policies will weigh on economic growth. The yuan also fell for a sixth consecutive day.
Europe took its lead from Asia, with the FTSE 100 opening lower after it had closed at its highest level since 1999 Monday.
Miners led the way due to the fears over China. Fresnillo, which closed down 3%, was joined by Rio Tinto, Anglo American, and Antofagasta, closing down 2.7%, 2.2%, and 2% respectively, as four of the five biggest losers in the FTSE 100.
"Nothing sums up the fickle nature of equity markets more than today?s market reaction to the very same events that we knew about Monday morning," said Michael Hewson, chief market analyst at CMC Markets.
London's blue-chip index did find some relief in the aftermath of the European Commission's latest economic forecasts for 2014. The EC raised its UK economic growth forecast for 2014 to 2.5%, from 2.2%. It also cut its unemployment forecast for the UK to 6.8% from 7.5%, and lowered its UK inflation forecast to 2.0% from 2.3%.
The Commission said that economic recovery in the euro area is set to continue, but unemployment is likely to remain high and inflation subdued. It raised the euro area growth forecast for this year to 1.2%, from the 1.1% predicted in November. The projection for 2015 was lifted to 1.8% from 1.7%.
Still, the FTSE 100 closed down 0.5% at 6,830.5, the FTSE 250 down 0.1% at 16,527.88, and the AIM All-Share index down 0.3% at 889.98. In Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt both closed down 0.1%.
On Wall Street, however, the DJIA, NASDAQ Composite and S&P 500 were all marginally higher at the close of the London equity market.
Housebuilders were amongst the biggest fallers in the FTSE 250 despite more positive mortgage data, while FTSE 100-listed Persimmon declined despite a positive set of 2013 results.
UK mortgage approvals increased more than expected to the highest since September 2007, data from British Bankers' Association showed. The number of loans approved for house purchases increased to 49,972 in January, the highest since September 2007, from 47,086 in December. The expected level was 47,150.
That news came as Persimmon echoed the positive sentiment of peers as it cited the recovery in the UK housing market and government mortgage-financing initiatives for driving up profit in 2013. The housebuilder posted pretax profit of GBP337.1 million for the year, from GBP218.2 million a year earlier, as revenue rose 21% to GBP2.09 billion from GBP1.72 billion in 2012.
Despite this, Persimmon ended down 0.6%, Redrow closed down 2.6%, Barratt Developments closed down 2.2%, Bellway, closed down 1.8%, and Berkeley Group closed down 1.7%.
Numis analyst Chris Millington said that the declines come after a recent strong performance by the housebuilders, and, while 2013 results so far have been good, expectations had been high given the strong recovery in the UK housing market last year.
Next up, Redrow and Barratt Developments report interim results Thursday, while estate agency Countrywide reports full-year results.
At the other end of the spectrum, CRH closed up 6.2%, ending the day as the leading gainer in the FTSE 100. The Irish building-materials group said it swung to a loss in 2013, as bad weather hurt trading and added to the pressure on profit margins, but Chief Executive Albert Manifold said the year represented a "trough" in profits and it will return to growth this year.
"We are encouraged by second-half activity levels in 2013 and by the fact that, while it is still early in the season, trading so far in 2014 has been ahead of last year," Manifold said.
St. James's Place was amongst the biggest winners in the FTSE 250, closing up 5.1%. The wealth manager said it is in "advanced talks" to acquire an adviser business in Asia, as it reported a 42% increase in annual profits. It also increased its dividend by 50% to 15.96 pence and said it expects to increase it by 30-40% in 2014.
The jump in share price means St. James's Place is once again the largest FTSE 250 company by market capitalization.
Ashmore Group, closing down 6.5%, was the mid-cap index's biggest faller. The company reported weak first-half results, with pretax profit at GBP79.5 million for the six months to end-December, compared with GBP120.2 million in for the corresponding period in 2012. A USD2.9 billion net outflow drove assets under management down by 2.7% to USD75.3 billion.
In the data calendar Wednesday, the German Gfk consumer confidence survey is released at 0700 GMT. Bank of England Monetary Policy Committee member Ben Broadbent gives a speech at 0925 GMT, ahead of the second preliminary UK gross domestic product readings for the fourth quarter at 0930 GMT.
Quarter-on-quarter growth is expected to remain unchanged from the first preliminary reading, falling to 0.7%, from the 0.8% recorded in the previous quarter. On a yearly basis, growth is expected to expand to 2.8%, up from 1.9%, as suggested in the initial preliminary reading.
UK total business investment figures are also scheduled for 0930 GMT.
In the afternoon, US new home sales numbers for January are released at 1500 GMT.
In a busy day in the corporate calendar, FTSE 100-listed Travis Perkins, Petrofac, ITV and Weir Group are joined by FTSE 250-contituents Henderson Group, Direct Line Insurance Group, Taylor Wimpey, Segro, International Personal Finance and CSR in releasing full-year results. Recruiter Hays releases interim results.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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