FTSE bounces after yesterday’s slump to new 2014 low

3rd October 2014

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The FTSE has gained 1% in early morning trading after slumping to its lowest point since 13 December yesterday.

Yesterday the FTSE closed down 111 points, or 1.69%, at 6446 after markets were disappointed by the European Central Bank’s asset buying plans. The fall is the largest one day drop recorded this year since 27 January.

UK and European investors expressed concerns about the ECB’s plan to buy covered bonds – a type of secured debt – from banks this month and purchase asset-backed securities, or bundled loans, this quarter.

ECB president Mario Draghi did not specify how much the central bank would buy and did not provide any more detail about quantitative easing measures.

This morning markets bounced to sit around 1% higher than yesterday’s closing value at just below 6500, although this is still 5% below the recent peak of 6878 seen at the beginning of September.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said yesterday’s fall shouldn’t spook investors too much.

‘Markets are prone to periodic correction and we have actually sailed through a pretty smooth 18 months, so it should come as no surprise to encounter some choppiness. Investors should keep focused on the long term and try and ignore daily movements as much as possible,’ he said.

Khalaf added that the level of the UK stockmarket looks close to historical average when company profits are considered.

‘This means it is neither obviously expensive, nor particularly cheap,’ he said. ‘In this environment, investors choosing active funds might consider backing experienced and proven stock pickers who derive returns not just from broad market movements but also from the fortunes of the particular companies they invest in.’

 

 

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