Markets continue decline as fears of correction grow

By Geoff Percival

European stock markets continued to shed value as investors locked in profits at the end of a strong month, with all eyes now fixed on potentially overvalued US markets after jitters in recent days.

Global markets have been under intense scrutiny over fears of a huge correction after US markets set new records with one of their best starts to a year in recent history.

The FTSE fell more than 1% to its lowest level in over a month; eroding its recent rally on the back of poor earnings, led by outsourcing group Capita.

The STOXX 600 index fell 0.2% on the day, ending at its lowest in more than three weeks and suffering its third consecutive day of losses.

The pan-European benchmark, however, ended January with a 2.1% monthly gain as optimism over earnings and economic growth outweighed recent bond market jitters and concerns over a rising euro.

”We’ve the impression that investors are looking for a pretext to take a breather and lock in some of their gains.” said Andrea Tueni, head of sales at Saxo Banque Paris.

“The end of the month is proving less than pleasant for equities in the UK and Europe, while in the US some early gains have been surrendered.

In London, the initial rally was given up without much of a fight, and again one of the chief culprits is sterling strength,” said Chris Beauchamp, chief market analyst at online trader IG.

“Almost half the rally from the December lows of 7300 has been given back, and while the selling may continue for a few days more, there are bound to be more than a few bargain hunters sniffing around the index,” he said.

Additional reporting Reuters