London close: Stocks end lower ahead of Fed meeting, retailers drag
Weak risk appetite ahead of the Federal Reserve meeting prompted the FTSE 100 to drop into the red on Tuesday.
After a turbulent performance, the FTSE 100 ultimately closed down 11.97 points at 6,792.24.
Jasper Lawler, a market analyst at CMC Markets UK, said: "Shares in Europe fell across the board today as investors took a more defensive stance leading into tomorrow’s Fed meeting, particularly given the reported weak capital flows into China and a further drop in German investor confidence."
He also cited continued fighting in eastern Ukraine and a weak performance by the retail sector as reasons for the drop.
Wednesday will see all eyes focused on the Fed and whether it amends its pledge that there is “considerable time” after its conclusion of asset purchases before it will look to raise interest rates.
In which event, economists suggest this would be a six-month "starters' gun" warning before a rate rise.
But even the prospect of a slight change in tone within the statement could cause a "tsunami", says Lawler, holding back investors from much action so far this week.
"The build-up to this month’s Fed meeting is such that there could be a big reaction either way the Fed moves. If the Fed keeps a more dovish tone then the US dollar is extremely overbought and subject to a sharp snapback. If market expectations of a more hawkish tone play out then stocks are near all-time highs and have plenty of room to fall."
Germany ZEW, Chinese FDI, UK CPI
Turning back to Tuesday's session, data showed that German economic expectations fell for a ninth straight month in September. The ZEW investor expectation index declined from 8.6 to 6.9, while the current situation index dropped from 44.3 to 25.4 (consensus forecast: 40).
Meanwhile, Chinese foreign direct investment unexpectedly dropped by 14% in August, an improvement on the 16.9% decline registered in July but well below the 0.8% increase predicted by analysts.
Markets were also digesting UK inflation data which, although in line with expectations, showed that consumer-price rises slowed to match a five-year low in August. The annual rate of inflation eased to 1.5% last month from 1.6% in July.
Retailers provide a drag
The retail sector was one of the day's poorest performers, dragged lower by readacross from Asos, which issued a profit warning, and N Brown, which gave a disappointing update.
Pearson led the upside after Morgan Stanley upgraded the publisher from 'equal weight' to 'overweight', citing the increased size of its market.
Barclays helped lift Royal Dutch Shell, which reiterated its 'overweight' rating on the oil group.
WPP shares also climbed after the group announced a strategic investment in Indigenous Media, a new digital studio that produces scripted content and develops channel brands for content distribution.
On the second tier, Africa-focused Ophir Energy rose after it announced a new gas discovery in block R which it says increases the value of its 80%-owned offshore Equatorial Guinea project. The Silenus East-1 well found a 67m gross gas column in the primary target with a high-quality reservoir in line with pre-drill expectations.
The downside was being led by Thomas Cook, which failed to impress with its latest trading statement, in which it admitted that price softness in the holiday industry had continued. The company revealed a downturn in Germany that it blamed on tensions with Russia, but all parts of the group were expected to deliver fourth-quarter results ahead of last year.
The fashion retailer N Brown Group fell after it said that sales were down in the first half as it faces a “transitional year”. The home-shopping group, which operates online and through catalogues, said revenues decreased by 0.6% in the first six months of the year. On a like-for-like basis, revenues dropped by 0.5%.
Market Movers
techMARK 2,832.25 -0.45%
FTSE 100 6,792.24 -0.18%
FTSE 250 15,593.05 -0.36%
FTSE 100 - Risers
Babcock International Group (BAB) 1,060.00p +1.92%
Pearson (PSON) 1,226.00p +1.66%
Royal Bank of Scotland Group (RBS) 351.30p +1.33%
Royal Dutch Shell 'A' (RDSA) 2,411.50p +0.96%
BP (BP.) 472.35p +0.86%
Royal Dutch Shell 'B' (RDSB) 2,499.50p +0.79%
SSE (SSE) 1,496.00p +0.74%
BG Group (BG.) 1,161.50p +0.69%
GKN (GKN) 342.80p +0.68%
Reed Elsevier (REL) 1,002.00p +0.65%
FTSE 100 - Fallers
Sports Direct International (SPD) 664.00p -3.77%
St James's Place (STJ) 678.00p -2.38%
SABMiller (SAB) 3,661.00p -2.11%
CRH (CRH) 1,419.00p -2.07%
Tullow Oil (TLW) 686.50p -2.00%
Royal Mail (RMG) 415.00p -1.96%
ARM Holdings (ARM) 920.00p -1.92%
easyJet (EZJ) 1,335.00p -1.84%
Randgold Resources Ltd. (RRS) 4,547.00p -1.84%
Severn Trent (SVT) 1,932.00p -1.73%
FTSE 250 - Risers
Ophir Energy (OPHR) 238.50p +4.61%
PayPoint (PAY) 1,059.00p +4.13%
Euromoney Institutional Investor (ERM) 1,134.00p +4.04%
Bank of Georgia Holdings (BGEO) 2,460.00p +3.93%
Evraz (EVR) 127.60p +3.82%
Ladbrokes (LAD) 130.00p +3.42%
Vesuvius (VSVS) 475.70p +3.30%
Afren (AFR) 99.95p +3.04%
Fidessa Group (FDSA) 2,262.00p +2.49%
NMC Health (NMC) 471.10p +2.41%
FTSE 250 - Fallers
Thomas Cook Group (TCG) 122.00p -6.15%
Brown (N.) Group (BWNG) 385.40p -4.84%
Foxtons Group (FOXT) 217.00p -3.98%
Dunelm Group (DNLM) 811.50p -3.96%
Imagination Technologies Group (IMG) 189.00p -3.91%
Hochschild Mining (HOC) 160.00p -3.79%
Smith (DS) (SMDS) 273.00p -3.70%
Just Eat (JE.) 282.40p -3.29%
Crest Nicholson Holdings (CRST) 326.00p -3.24%
Oxford Instruments (OXIG) 1,145.00p -3.13%