Going into the last few minutes of trading, the UK market is nursing some chunky losses after weak economic news flow capped the recent positive sentiment.
News that UK manufacturing shrunk at its fastest pace in 16 years and another drop for house prices according to the Hometrack figures put shares on the back foot right from the off this morning. The FTSE 100 quickly gave up the gains put on at the end of last week, demonstrating yet again how fragile sentiment is at the moment.
Wide spread weakness throughout the mining stocks also piled on the pressure – with the likes of Lonmin and Vedanta off by double digit percentages. Despite the bombed-out look for this sector, investors continue to be very wary of recovery prospects in the short term at least. Bearing in mind the ongoing weakness in commodities, rallies in mining shares continue to be treated as opportunities to sell before even lower prices are reached - and there seems little at the moment to suggest that this group has seen the worst just yet.
Back to the wider market - in late trading the FTSE 100 had staged a small bounce back, ahead of the 4000/4050 zone that underpinned any weakness last week as traders thought that maybe the sell-off had been a little overdone. All eyes are on Thursday’s interest rate announcement from the Bank of England, with markets already factoring in a reduction of one percent for base rates. The next few days may see some choppy trading ahead of this, with something of a bounce back into the announcement. But, as if we needed reminding, the economic back drop remains downbeat and the fiscal measures taken so far by both the central bank and the government seem to be doing little to stimulate confidence. It is hard to see any recoveries in stock markets as anything but short term at the moment and traders seems to be too willing to jump out of rallies very quickly, ahead of the perceived next major sell-off.
Click here to go to IG Index
David Jones is Chief Market Strategist at IG Index. We do not endorse the information and analysis available in this comment and it is provided purely for information purposes only and is delivered as a personal view by the writer. Under no circumstances is the information in this comment to be used or considered as an offer to sell, or a solicitation of any offer to buy. While all reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of publication, we make no representation as to its accuracy or completeness and it should not be relied upon as such. The investments referred to herein may not be suitable investments for all persons accessing this page. You should carefully consider whether all or any of these are suitable investments for you and if in any doubt consult an independent adviser. We accept no liability whatsoever for any direct or consequential loss arising from use of the information on this web page. Please see our Terms and Conditions.