Ruth Mitchell

Equities decline again on continuing worries - Latest Market Analysis

With Wall Street suffering significant losses overnight on continuing recession fears, European markets were unlikely to buck the trend despite the sizeable losses seen in previous trading. The FTSE opened over 1% lower and maintained that level that level throughout the morning. Early afternoon however saw markets tumble, lead by a sharp selloff in miners in response to US manufacturing PMI which fell to 52.7 in July, from 53.3 in June. The equivalent reading for the Services sector fell to its lowest level since February 2010, contributing to a raft of recent economic data that has increasingly pointed towards a global recession.

Europe did not escape attention, with Spanish and Italian Bond yields both pushing out to maintain their stance above the worrying 6% level. At the time of writing, Silvio Berlusconi was addressing the Italian Parliament in a bid to reassure sceptical bond markets. Investor’s reception of this, and of his later appearance before the Senate, will likely shape the market open tomorrow. Its importance may be augmented by the fact that the address was delayed until after the market close, a move which may raise questions as to its content.

Fresnillo, the precious metals miner, was lifted 5.2% in response to further increases in gold and silver prices, which were up 1.9% and 4.2% respectively. The latter has reached another record high, testing the $1700 mark which looked fairly distant only a few weeks ago. As previously alluded to, mining stocks populated the lower end of the London market, with heavyweights Rio Tinto and BHP Billiton (which collectively make up over 7% of the FTSE 100) both down around 4%. Glencore was subject to the most severe selling, off 7% on the day.

Intervention by the Swiss National Bank to curb the almost parabolic appreciation of its currency in recent weeks seemed to work, with an interest rate cut of 50 basis points and an increase in monetary supply initially causing the Euro to bounce almost 3% against the Swiss franc. As risk aversion intensified throughout the day, the Swisse fought back to stabilise around 1.0% lower. The FTSE 100 lost 134 point to finish at 5585, a 2.3% loss on a savage day in financial markets.

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