Britain’s top shares slid to five-month lows on Thursday after the United States Federal Reserve said it planned to slow its stimulus programme later this year.
Reuters reports that the FTSE 100 index closed at 189.31 points, or three per cent, lower at 6,159.51 – leaving it at levels not seen since January and its biggest daily drop since September 2011.
Fed Chairman Ben Bernanke said overnight that the US economy was growing fast enough for the central bank to begin slowing the pace of its $85bn monthly asset purchases later this year, with the goal of ending it in mid-2014.
“It was expected at some point that the Fed would pull back from QE, so we haven’t seen any panic selling. But I do see that the FTSE has got further down to go,” Manoj Ladwa, head of trading at TJM Partners, said.
“We’ve had a fantastic run on the back of quantitative easing, and we’re going to have to give something back.”
Buoyed by monetary stimulus, the FTSE 100 gained 16 per cent in the first five months of the year but has fallen by 10 per cent since the end of May, when the Fed first hinted it would consider slowing asset purchases in the near future.
Mining stocks dropped by 4.7 per cent to four-year lows, the top sectoral faller, as commodity prices came under pressure, with gold dropping to 2-1/2-year lows.
Polymetal was the top FTSE 100 faller, down by 12 per cent, while peers Fresnillo and Randgold fell by 8.1 per cent and 7.5 per cent respectively, as demand for safe-haven gold suffered at the hands of a strengthening dollar.
“Polymetal has been on my radar to go short of on any rallies,” Ladwa said.
Copper miners also suffered after Chinese factory activity weakened to a nine-month low in June.
Every stock in the index ended in negative territory, with financials also among heavy fallers.
Aberdeen Asset Management fell by 7.9 per cent. The stock has slid 25 per cent over the last month, bearing the brunt of concerns over Fed policy as the prospect of reduced stimulus hurts the long-term prospects for markets that asset managers are seen as proxies for.