London’s blue chip share index dropped into the red today as investor nerves built ahead of key UK economic news.
The FTSE 100 Index closed down 38.6 points at 5703.9 as traders awaited the Government’s spending review, as well as the latest interest rate minutes and borrowing and retail sales figures.
Mixed earnings figures on Wall Street added to the pressure, with heavy early falls on the Dow Jones Industrial Average sending the Footsie deeper into negative territory.
Disappointing earnings reports from corporate heavyweights Apple and IBM offset better-than-expected results from US investment banking giant Goldman Sachs, leaving the Dow down more than 1% at one stage.
News of a shock decision by China to raise its key interest rate by 0.25% – its first hike since 2007 – also weighed on global markets as the tactic was seen as a move to slow down its economy.
This saw mining stocks plunge on London’s Footsie, with Xstrata among the worst affected, down 4% or 57p at 1248.5p.
The pound weakened against the dollar amid the anxiousness over this week’s economic developments, as well as a CBI survey showing the worst reading for factory orders last month since April.
Sterling fell 1% to 1.57 US dollars.
Today’s defence budget blow from the British government hit a number of defence-related stocks.
Babcock International dropped 5%, or 28.5p to 564p, while BAE Systems fell 6p to 363.9p.
Banks lost earlier gains, after credit rating agency Fitch said the banking sector was slowly returning to health in the UK, but warned that regulation of capital and liquidity requirements was likely to weigh on earnings in the long-term.
Lloyds Banking Group was the worst off, down 1.7p to 70.5p.
In corporate news, shares in housebuilder Bellway were under pressure after it said it did not expect a pick up in sales before next spring.
Shares fell 6% or 36.5p to 565p, even though Bellway posted full-year results slightly ahead of expectations and increased its dividend.
Meanwhile, retailer Blacks Leisure jumped 25% – up 8p to 42.5p – after it said it had received takeover approaches for some or all of the business.
Sports Direct, which pulled an offer for Blacks in March, fell 1.7p to 147.5p even though the Serious Fraud Office said the company will not face charges in relation to its inquiry into allegations of cartel activity.
Shares in JJB Sports, which was also cleared, were up 0.25p at 10.5p.
The SFO is still investigating individuals in the case, while the Office of Fair Trading added that its own investigation into alleged anti-competitive conduct in the sports goods retail sector was continuing.
The biggest Footsie risers were Diageo up 28p to 1163p, Whitbread ahead 35p to 1728p, Standard Chartered up 38p to 1959p and Autonomy up 25p to 1444p.
The biggest Footsie fallers were Fresnillo down 68p to 1223p, Xstrata off 57p to 1248.5p, Man Group down 10.1p to 259.8p and Vedanta Resources down 79p to 2174p.