Leading shares suffered their biggest one day fall for three weeks as a combination of concerns sent investors fleeing for the exits.
The latest catalyst was a surge in crude prices as tensions grew in the Middle East, with Saudi Arabia launching military action against rebels in Yemen, adding to fears of disruptions to supplies. Brent crude is off the day’s highs but is still currently 4% higher at $58.79 a barrel.
In the background were continuing worries about Greece, as the deadline for the country to resolve its financial crisis grew nearer. Meanwhile mixed signs from the US economy - poor durable goods figures on Wednesday, better than expected US jobless claims which fell to a five year low on Thursday - have also unsettled markets which had been anticipating good growth to continue. Investors are also attempting to second guess when the US Federal Reserve will raise interest rates, which it seems determined to do despite signs of weakness in the economy. With that in mind, Friday’s US fourth quarter GDP figures could provide further clues.
Overall the FTSE 100 finished 95.64 points lower at 6895.33, and last week’s surge above the 7000 barrier seems a long way off. European markets were also in decline, and Wall Street was down by the time London closed, albeit off its worst levels.
As investors sought out havens amid the storm, precious metals were in demand, helping Randgold Resources rise 20p to £49.02, one of just three companies in the FTSE 100 to buck the downward trend.
Another was Jordanian drug maker Hikma Pharmaceutical, which only joined the leading index this week. It added 10p to 321.94 after JP Morgan Cazenove raised its price target from £22.50 to £25. The bank suggested Hikma could be on the acquisition trail after announcing a bond issue:
Hikma [on Wednesday] announced their potential first bond issuance, which we believe could be partly to fund future M&A plans. At the full year results they commented on their $1.5bn M&A firepower, and we see a high probability that at least some of this is put to work in 2015, with the Non-Injectable generics division likely the most significant beneficiary. With M&A firepower at 25% of market-cap, we see Hikma as having the highest M&A optionality in the sector, and based on its strong track-record, we anticipate significant accretion.
The final riser was Weir, which supplies pumping equipment to the oil industry and benefited from the rise in crude prices to add 9p to £17.77.
But the crude rise is likely to mean an increase in fuel costs, so travel companies were among the fallers. Airlines were also unsettled by the air crash in the Alps. British Airways owner International Airlines Group lost 20.5p to 587p and easyJet fell 53p to £18.37 despite raising its first half profit forecasts, as it warned that it could suffer over the full year if exchange rates remained at current levels.
Technology stocks in the US had fallen back on fears of slowing growth and excessive valuations, sending UK chip designer Arm down 47p to £10.80.
London Stock Exchange suffered the day’s biggest decline in the FTSE 100, down 143p to £23.95 after its largest shareholder, Borse Dubai, sold its entire 17.4% stake at a reported £22.50 each.
Elsewhere oil explorer Ophir Energy, which earlier this month completed the takeover of rival Salamander Energy, added 2.5p to 141.3p after analysts at Jefferies moved their recommendation from hold to buy:
There is a strong value argument for Ophir Energy at this level....We upgrade to a buy rating due to relative balance sheet strength, discovered gas resource monetisation optionality and longer term exploration exposure.
Finally, Aim-listed Ilika ended nearly 10% higher at 79.5p after its first solid-state batteries - said to be faster charging and longer lasting - began pilot production at its plant in Southampton.
