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Markets plummet in response to weak US manufacturing data: Latest Market Analysis

Stock markets had been enjoying a much more positive start to week for most of the day, celebrating eventual agreement overnight in the US on measures to deal with its current debt issues. Although the raising of the debt ceiling limit and spending cuts agreed thus far only help the economic heavyweight until early 2013, markets certainly breathed a collective sigh of relief as the FTSE 100 and its European peers spent most of the day higher by over 1%.

US indices opened in a similarly buoyant fashion, but the joy was short lived, just 30 minutes later US manufacturing data suggested new orders had fallen dramatically in July, shell-shocked markets tumbled within seconds.

The FTSE 100 went from over 1.25% up to around 0.5% down, with subsequent volatility seeing the index end the day 40 points (0.7%) lower at 5774.

The beleaguered bank sector stocks were again the worst hit, Lloyds Banking Group (5% lower) and RBS (4.3% lower) amongst the worst performers on the day. But it wasn’t all doom and gloom in the sector, as HSBC reported better than expected earnings and future cost savings in its first half report and its shares were actually amongst the best performers of the day. Although they too suffered from the mid afternoon sell-off the stock still performed well enough to record a 13p rise to 608p.

The UK house building sector was upgraded by Goldman Sachs, which should have been good news for the region’s prominent two. Bellway shares rose 1.2% to 668p as the US investment giant reiterated its buy rating, but despite an upgrade to buy from neutral, shares in Barratt Developments fell 5.6% to close 5.5p lower at 93p.

This was posted in Bdaily's Members' News section by Ruth Mitchell .