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Published On: Fri, Jun 21st, 2013

FTSE 100 declines as stimulus hits Europe

Highlights:

  • FTSE slides for fifth consecutive week
  • RBS plummets 7.2 percent on speculation of a break up
  • Analysts predict that declines should end soon

The FTSE 100 slid again today, completing a straight month of weekly declines. With the shift in monetary policy looming in America, many investors appeared to be selling European stocks and placing their wealth in the US dollar, as the world’s most common currency has regained its safe haven status and looks likely to strengthen further in the near future.

FTSE 100 declined by 43.34 points, or 0.7 percent, closing week at 6116.17 points. Six weeks ago the London blue-chip index was threatening to break the record for its all-time high a price of 9930, which was set during the “.com bubble” back in 1999. However since May 22nd, when the Federal Reserve chairman suggested that the world’s largest central bank may begin to taper its monetary stimulus package, the index has been in freefall – with only a few days breaking up the declines.

While investors are continuing to remove their wealth from European stocks, it is widely believed that the FTSE 100 will put up a strong fight around the 6000 points mark. Analysts are citing the fact that the index has now declined 11 percent since mid-May, which could mean declines beyond this point would leave the index massively undervalued and provide bargain hunters with a low point of entry.

While miners and energy stocks were once again dragging the index down, it was the Royal Bank of Scotland that had the worst results of the day with a decline of 22.000, or 7.24 percent, closing at 281.70. The bank declined on further speculation that the UK government will look to split the bank up rather than sell it as a complete entity. The bank was on the receiving end of a £45bn bailout back in 2008, at the height of the financial crisis. Outgoing CEO, Stephen Hester, has publicly stated that the sale of the Royal Bank of Scotland could take up to 10 years to be completed.

Fresnillo PLC registered declines of 5.15 percent, leading the miners in declines. Polymetal International PLC also saw a slump of 2.87 percent as concerns for the longtime demand from China continue to drag the sector down.

While the FTSE 100 has been retreating a rapid pace of late, it has not been alone in its declines. The stoxx 50 fell by 56.97 points today, or 1.43 percent. The German DAX also saw declines, plummeting by 139.24 points, or 1.76 percent. So, when compared to its European counterparts, the situation in London isn’t as bad as it looks at first glance.

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About the Author

- Gregory previously worked for a leading financial news publication and is now assistant news editor of financialtrading.com.

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