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FTSE 100 declines again - Latest Market Analysis

Markets maintained much of the negative sentiment that had seen a selloff in risk assets on Monday, despite progress over reaching a last minute debt deal in the US. The debt-limit bill was passed by a margin of 269-161 votes in the House of Representatives, with the bill expected to be approved by the senate before being signed into law by Mr Obama later today.

With the US debt debate kicked into what has become known as the long grass, investors turned their focus to a raft of poor economic data and, of course, customary fears over the Euro zone. Italy and Spain were firmly in the spot light, with the ten year government debt for both nations reaching 11 year highs of 6.11% and 6.23% respectively. Rome, with its debt to GDP ratio of 120%, had managed to avoid the attention of the bond vigilantes recently, but increasing political concerns in the centre-right coalition is starting to weight heavily on their triggers. The FTSE steadily lost ground throughout the day falling 56 point to finish at 5718, its 1.0% loss seeing it outperform the CAC and DAX which lost 1.8% and 2.3% respectively.

A beleaguered Barclays was initially among the better performing stocks on the index, although it gave back its early gains to finish down 0.1% (considerably better than its peers RBS and Lloyds), in response to half yearly results. Despite being 33% lower than last year, pre-tax profits came in ahead of analysts’ expectations at £2.6bn. The drop in profits was largely attributable to a £1bn provision for legal settlements regarding payment protection insurance. The market welcomed the 41% decrease in “bad” debts (i.e. Euro zone write downs), the meeting of lending targets under Project Merlin and cost cutting through historic and planned job cuts.

At the bottom of the FTSE 100 was Hargreaves Lansdown, with investors concerned that the financial services firm will suffer as result of a regulatory u-turn by the FSA who may potentially ban rebate payment to the group from fund management firms who use its Vantage platform. The shares lost 74p to finish the day down 12.7%.

Gold, silver and the Swiss franc once again enjoyed significant gains, the former on the verge of breaching the $1640 mark.

This was posted in Bdaily's Members' News section by John Dance .