Ben Bernanke’s QE announcement bears down on FTSE 100 – Friday market close report

21st June 2013

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It was a volatile week in stock markets as Federal Reserve chairman Ben Bernanke announced that quantitative easing was likely to be tapered back later this year and shut-off altogether in 2014. Philip Scott reports.

In addition, data from HSBC indicated that Chinese manufacturing had fallen to a nine-month low in June adding to the gloom with analysts asking whether the world’s second largest economy was finally going to suffer a hard landing. Ratings agency Fitch also issued a report raising concerns about shadow banking and the risk of a credit crunch there.
The notion of the US no longer boosting its economy with its $85 billion monthly bond buying programme, sent the UK’s FTSE 100 into free-fall with the top-flight shedding 3% on Thursday, marking its worst one-day fall since September 2011, as it tumbled below 6,200. Bernanke had stated that he felt it would be “appropriate to moderate the monthly pace of purchases later this year” if the US continues to expand as forecast.

Only a month ago the index was on the cusp of achieving a new all-time high, as it edged over the 6,800 mark but the continued instability since then has critically eroded into the gains it made earlier this year.
The losses continued into Friday, with the Footsie closing 43.34 points down on the day at 6116.17, with 3% shed over the week as a whole. At this level it is now down by almost 11% over the past 30 days and its 12 months gains have dropped to just 10%.
Elsewhere UK banks were told by regulators that they would have to further bolster their balance sheets. The Bank of England’s new banking regulator the Prudential Regulation Authority, told them they had to find an extra £13.4bn of capital this year, on top of the other monetary buffering measures they have put in place.
It also emerged in reports that part state owned banks Royal Bank of Scotland, down 11% to 281.7p over the week and Lloyds Banking Group, flat at 61p, could have to sell-off more branches than anticipated. Chancellor George Osborne told the Office of Fair Trading to consider if a larger disposal strategy could boost competition within small business banking.

Elsewhere among the banks, HSBC was 3% lighter over the week at 661.6p while Barclays lost 5% at 281.6p and Standard Chartered loosened 3% at 1,403.5p. It was a bad week for miners with Rangold Resources off 14% at 4,208p and Fresnillo down 17% at 911p. Polymetal International was the week’s steepest faller, off 19% at 525.5p.
While it was not a week for big gains, a few stocks did well with RSA Insurance and Reckitt Benckiser each managed a 2% rise, to close at 118.8p and 4654p respectively.

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