Commodities and banks hit as debt woes send FTSE lowerPosted on Thursday, June 16, 2011 - 13:36 pm
By David Brett
LONDON (Reuters) - The top share index was sharply lower on Thursday as global recovery concerns sent commodity stocks and banks down, echoing overnight losses in the U.S. and Asia.
Riskier assets were among the top fallers as concerns mounted over Greece's debt situation and the economic recovery in the United States, after data showed a troubling mix of higher prices and weak growth in the world's biggest economy.
Miners <.ftnmx1770> were the biggest fallers on London's blue chip index, following metal prices lower, as worries grew over future demand for natural resources.
The United States' recovery appears to be hitting a soft patch and China is trying to cool its overheating economy.
"The Chinese economy has undoubtedly slowed as a result of the monetary tightening ... but .. the trough in leading indicators suggests that the pace of slowdown is moderating," said Gerard Lane, equity strategist at Shore Capital.
"As a result the underperformance seen in the first quarter of those stocks with a high degree of emerging market exposure should come to an end."
Deutsche Bank cut its target price on Glencore following the firm's first-quarter update on Tuesday, warning investors to "expect near-term headwinds" although noting the company's business model remained intact.
Glencore's shares are now more than 11 percent below their float price and just a day away from the end of the stabilisation period, during which underwriters to the issue are able to underpin the value of the shares.
Another commodity-related stock, oil explorer Cairn Energy
The FTSE 100 (FTSE:^FTSE) was down 40.73 points, or 0.7 percent, at 5,701.82, by 9:02 a.m., adding to its 1 percent decline on Wednesday.
"Since March, the FTSE has been trading inside of a major range of 5591.59 to 6103.73," said Enis Mehmet, analyst at Autochartist.
"Now that the index has broken the key retracement zone of this range, bearish traders can build a case for an even further decline to the March low."
Mounting concerns over global debt weighed on investor sentiment, as uncertainty lingered over Greece's situation and the threat of contagion, while the U.S. nears its 'debt ceiling'.
The Greek prime minister said he would form a new government as euro zone finance ministers conceded that a deal on a second international bailout of the ailing country was now unlikely to be reached at a summit next week.
Debt fatigue weighed on the banking sector <.ftnmx8350>, with Barclays
The sector was also in the doldrums after Chancellor George Osborne backed the UK Independent Commission on Banking's proposal to ring-fence retail banks from investment banks and set higher capital ratios, with investors uncertain as to how the changes will benefit shareholders.
On the upside, TUI Travel
On the macroeconomic front on Thursday, retail sales for May will be released at 9:30 a.m.
(Editing by Sophie Walker)