Bloomberg News

U.K.’s FTSE 100 Closes Below 5,000 for First Time Since 2010

October 04, 2011

Oct. 4 (Bloomberg) -- U.K. stocks fell, with the FTSE 100 Index closing below 5,000 for the first time since July 2010, as policy makers failed to reassure investors they can contain the European debt crisis that threatens to curb economic growth.

Barclays Plc fell 7.6 percent, following losses in banking shares across Europe, as Deutsche Bank AG abandoned its 2011 profit forecast. Royal Dutch Shell Plc, Europe’s largest oil company, dropped 1.9 percent as crude retreated. Rio Tinto Group declined 3.8 percent.

The benchmark FTSE 100 Index slid 131.06, or 2.6 percent, to 4,944.44 at the 4:30 p.m. close in London, its fifth day of declines. Earlier, it fell as much as 4.1 percent and momentarily went 20 percent below its Feb. 8 peak. The FTSE All- Share Index decreased 2.7 percent today, while Ireland’s ISEQ Index retreated 3.6 percent.

“A failure to convince investors that funding pressures can be alleviated through coordinated and concerted effort, could result in further sharp falls,” Peter Oppenheimer, an equity strategist at Goldman Sachs Group Inc. in London, wrote in a report.

The FTSE 100 lost 14 percent in the third quarter, its biggest drop since 2002, amid concern that Greece’s debt woes will spread to other countries in the region and that the euro area’s economy is stalling.

Greek Aid

Euro-area finance ministers meeting yesterday considered “technical revisions” to the July deal for the second Greek aid package, Luxembourg’s Prime Minister Jean-Claude Juncker said today, fueling concern bondholders may have to take bigger losses on the nation’s debt.

Goldman Sachs cut its global growth forecast for this year and next, predicting recessions in Germany and France as the European economy stalls and the risk of a contraction in the U.S. grows. The world economy will probably expand 3.8 percent this year and 3.5 percent in 2012, compared with earlier predictions of 3.9 percent for 2011 and 4.2 percent for next year, Goldman Sachs economists Jan Hatzius and Dominic Wilson wrote in an Oct. 3 report.

The sustained drop is dragging the FTSE 100 through technical levels, said Lawrence Peterman, investment director at Eden Financial Ltd. in London. “There is some support for the FTSE 100 at 5,000. It’s interesting to see whether that level holds today. I suspect it probably won’t.”

Banks Decline

Barclays, the U.K’s second-biggest bank by assets, lost 7.6 percent to 144.35 pence. Royal Bank of Scotland Group Plc retreated 4.2 percent to 21.52 pence. Financial shares fell as Deutsche Bank cut its profit forecast for 2011 and the board of Dexia SA asked the chief executive officer of Belgium’s largest lender by assets to solve its “structural problems.”

Shell sank 1.9 percent to 1,928.5 pence. BP Plc retreated 3.8 percent to 372 pence. Oil fell for a third day in New York on signs of rising U.S. supplies and output from Libya.

Rio Tinto, the world’s second-largest mining company, slumped 3.8 percent to 2,712.5 pence, the lowest price since October 2009. BHP Billiton Ltd. slid 2.5 percent to 1,667 pence.

Copper fell for a fifth day in London on concern demand for the metal may weaken as a worsening European sovereign-debt crisis saps economies.

British Sky Broadcasting Group Plc dropped 2.7 percent to 639 pence after the European Union’s highest court said the Premier League’s geographic restrictions on broadcasters televising its soccer matches breach EU rules.

Tesco Plc climbed 2.6 percent to 380.1 pence as UBS AG upgraded the stock to “buy” from “neutral.”

--With assistance from Alexis Xydias in London. Editors: Srinivasan Sivabalan, Andrew Rummer

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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