Britain’s FTSE 100 share index suffered its biggest one-day drop in a year on Thursday, knocked off historic peaks by weak economic data and signs the United States Federal Reserve could soon taper its stimulus program.
Fed chairman Ben Bernanke said late on Wednesday the central bank could scale back quantitative easing in coming months if economic momentum was maintained, thus threatening the removal of the stimulus which has been a key driver of the year-long equity market rally.
Reuters reports that news of a slowdown in factory activity in China, a top market for Britain’s heavyweight miners, gave investors a further excuse to take profits.
The FTSE 100 fell by 143.48 points, or 2.1 per cent, to 6,696.79, retreating from Wednesday’s 13-year peak of 6,875.62 and suffering its biggest one-day drop since last May.
“Given the storming start we’ve had to the year, a bit of profit taking at some point was inevitable.
Markets have reached year end levels that most people had penciled in and most institutional investors don’t have a great deal of confidence in this market, nobody is in this for the long haul,” said Mike Ingram, market analyst at BGC Partners.
Of the 100 blue chips, 94 closed lower – the highest number of fallers since September, according to Datastream.
There was some buying into the dip towards the end of the session, but the move was more muted than in previous falls.
“You would need to see several hundred points off the index before you can think about putting money in,” said Andrew Feldhaus, investment manager at Redmayne Bentley.