LONDON MARKET CLOSE: FTSE 100 Falls To 2015 Low In Global Equity Rout

LONDON (Alliance News) - The FTSE 100 fell to its lowest level of the year so far Friday amid a global equity sell-off as concerns about China were reinforced by poor manufacturing purchasing managers' index results earlier in the day and Greece announced snap elections, further highlighting the country's political instability.

Oil prices also slid to new six-and-a-half year lows which further amplified the losses already made during the rest of the session. Analysts say markets are oversupplied and demand from China is dwindling, which is weighing on prices. West Texas Intermediate reached its lowest level since February 2009 at USD40.15 a barrel, while Brent oil fell to levels close to its own six-and-a-half year low at USD45.28 a barrel.

The FTSE 100 closed down 2.8% at 6,187.65, its lowest level since mid-December 2014. This means that London's blue chip index has failed to end the day higher for nine consecutive sessions and closed the week down 5.5%. In the FTSE 100 only one stock closed higher, Royal Mail, up 1.6%.

The FTSE 250 closed down 2.1% at 16,876.60, falling below the 17,000 threshold for the first time since mid-March. The AIM All-Share closed down 1.5% at 732.40.

European indices also suffered with the CAC 40 in Paris ending down 3.2% and the DAX 30 in Frankfurt down 3.0%.

In New York at the London close, the DJIA was down 1.7%, the S&P 500 was down 1.8% and the Nasdaq Composite was down 2.0%.

Adding to the downbeat string of economic data from China, the US manufacturing sector expanded at a slower rate in August. The preliminary Markit PMI result came in at 52.9, down from the 53.8 seen in July. Economists had expected the reading to rise slightly to 54.0.

"August's survey highlights a lack of growth momentum and continued weak price pressures across the U.S. manufacturing sector, which adds some fuel to the doveish argument as policy-makers weigh up tightening policy in September," said Tim Moore, senior economist at Markit.

However, it was the weak manufacturing data from China which had the market's attention and drove sentiment from the beginning of trade. The preliminary Caixin manufacturing PMI score fell to 47.1, down from 47.8 in July, and missed expectations of a slight fall to 47.7. It also moves further beneath the line of 50 that separates expansion from contraction. New orders decreased at a faster rate, as did new export orders, employment, output prices, stocks of purchases and quantity of purchases.

Chinese stock indices closed heavily lower Friday, with the Hang Seng in Hong Kong down 1.5% and the Shanghai Composite down 4.3%. The Shanghai index shed nearly 12% over the course of the week.

"The constellation of adverse news from China continues to provide ample fuel for the risk-off theme in global markets," said analysts at Lloyds Bank.

"August's Chinese manufacturing PMI fell to its weakest reading since 2009. Meanwhile, the renewed fragility of Chinese equities - now down some 32% since their June peak - alongside lingering anxiety about whether the Chinese authorities will permit a further depreciation of the yuan also highlight the uncertainty about how quickly growth in China is slowing down."

Political uncertainty in Greece also stole some attention and weighed on sentiment. Greek media reported Friday that 25 hard-left Syriza lawmakers want to break away from the ruling party and form their own parliamentary faction ahead of snap elections on September 20.

The rebels, who refused party leader Alexis Tsipras their support in a vote on further austerity and reforms last week, will call their party National Unity. It will be the third-largest bloc in parliament after Syriza, which then would have 124 members, and the conservative Greek opposition party Nea Dimokratia, with 76.

This comes after Tsipras announced his resignation Thursday, hours after Greece received the first payment from its third internationally backed bailout in five years. He said he called the elections because if he is to continue governing, he needs a strong mandate going into talks about further reforms to the Greek economy.

Meanwhile, New Democracy head Evangelos Meimarakis will have a chance to form a new government following Tsipras' surprise resignation, according to an email from the office of President Prokopis Pavlopoulos sent early Friday. The constitution stipulates that the head of the next-largest party gets a three-day window to form a government after the premier resigns. But it is unlikely that Meimarakis's party will be able to pull together a government, which would leave Greece on track for its second round of elections this year.

On the UK corporate front, Standard Chartered was one of the worst performers in the FTSE 100, down 4.3%. A whistleblower has provided evidence that helped US authorities reopen an investigation into the emerging markets-focused bank over possible sanctions violations, the Financial Times reported Friday, citing people familiar with the probe.

The British Bank is subject to an investigation by the US Department of Justice, the Manhattan district attorney and the Department of Financial Services, centred around whether the bank breached sanctions after the period covered by a settlement it made in 2012 over similar allegations, by processing US dollar transactions including those involving Iran-controlled entities in the United Arab Emirates.

ARM Holdings closed down 3.6% after Liberum cut its estimates and price target on the chip designer, saying the smartphone market is slowing sharply and the company remains a smartphone play.

Spire Healthcare Group ended as the worst performer in the FTSE 250 by some distance, ending down 13%. The private healthcare provider cut its revenue guidance for 2015 due to short-term challenges it expects to face in UK National Health Service activity in the second half, as it reported a rise in pretax profit and revenue for the first half.

Spire now expects flat revenue in the second half of 2015, compared to previous guidance of low single-digit growth, due to a slowdown in the flow of cases from the NHS to the independent sector in recent weeks. The cut to the revenue guidance means the group now expects its revenue and earnings before interest, taxation, depreciation and amortisation growth to be 4% to 6% for the full year.

Spire highlighted that whilst there is increasing demand for healthcare services in the UK, there is a general acceptance amongst major political parties and market commentators that the NHS is "on track to experience a significant and growing funding gap over the next five years, which is likely to be only partly alleviated by productivity improvements and cost efficiencies."

SIG closed up 0.4% after Liberum upgraded the building products company to Buy from Hold, saying it likes that the group is targeting gross margin recovery in the face of competition in Europe. Analyst Charlie Campbell cited three reasons to be positive on SIG's outlook, including a commitment to restoring margins, good momentum in its cost savings programme, and an improving outlook in key markets.

In a very light economic calendar Monday, there is Chicago Fed National Activity Index at 1330 BST, before Federal Reserve Bank of Atlanta President Dennis Lockhart speaks at 2055 BST.

In the UK corporate calendar, there are interim results from distribution and outsourcing company Bunzl, speciality insurer Amlin, floor coverings distributor Headlam Group, Industrial Multi Property Trust and Irish property and casualty insurer FBD Holdings.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

Copyright 2015 Alliance News Limited. All Rights Reserved.