London open: Fed concerns, poor Chinese data spark sell-off

23rd May 2013 08:31

Worries about the Federal Reserve 'tapering' quantitative easing (QE) prematurely spooked markets on Thursday morning, along with a disappointing reading of manufacturing activity in China.The FTSE 100 had surged to a fresh 13-year high high of 6,840 the day before, its second-highest close in history, after Fed Chairman Ben Bernanke initiated with a dovish tone in a prepared speech to Congress on the central bank's easy-money policy.He started by saying that the Fed would not scale back its asset purchase programme too soon for risk of endangering the economic recovery and said that a highly accommodative stance will be appropriate "for a considerable time".However, when faced with questions from politicians, the Fed chief did hint that a tapering of QE measures could happen "in the next few meetings" if the Fed sees a sustained improvement in the economy.Simon Smith, the Chief Economist at FxPro said this morning: "The message is markets have to remind themselves that in many ways they are living on borrowed time and the Fed is doing their level best to prepare them for the fact that they cannot continue to buy $85bn of assets a month for ever. We could well be headed for a much more volatile summer."Bernanke's comments saw the FTSE 100 lose as much as 1.7% in early morning trade, following similar falls for benchmarks on Wall Street overnight. Meanwhile in Asia, markets suffered much steeper losses overnight - with Japan's Nikkei diving a whopping 7.3% - as traders reacted to remarks from the Fed Chairman as well as some gloomy economic data from China.Factory activity growth in China moved backed into negative territory in May sparking worries over the recovery as the world's second-largest economy stagnates. The HSBC flash China manufacturing purchasing managers' index for the month of May unexpectedly fell to a seven-month low at 49.6 from the previous month's reading of 50.4. Analysts had forecast the index to rise to 50.5. Any reading below 50 indicates a contraction in the sector. FTSE 100: Banks and miners fall early onA fall in risk appetite this morning saw the banking and mining sectors decline sharply early on. RBS and Lloyds, which continue to be at the centre of reprivatisation speculation, were heavy fallers along with Anglo American, Antofagasta and Rio Tinto.ARM Holdings was extended recent losses as Exane BNP Paribas joined the list of brokers to show caution on the chip designer stock following the group's investor day earlier this week. The broker downgraded its rating to 'neutral' today.Retail group Kingfisher was also under the weather after Nomura cut its recommendation to 'reduce', saying that the shares have gained too much recently "given weakness ahead".Drinks firm SABMiller was in the red despite increasing its full-year revenue from $31.4bn to $34.5bn in the year to end March.United Utilities was among the rare risers this morning after delivering a rise in full-year profit on the back of a strong operational performance.FTSE 250: Halfords plummets after dividend utCar and bike parts retailer Halfords sunk early on after the firm slashed its full-year dividend by nearly a quarter as profits dropped in the year to March 29th. The company said its performance reflected a "demanding trading environment".St James's Place was also a heavy faller after Lloyds yesterday cut its stake in the wealth manager for the second time in three months. The bank sold 77m ordinary shares representing 15% of the company.FTSE 100 - RisersUnited Utilities Group (UU.) 792.00p +1.34%Severn Trent (SVT) 2,053.00p +0.39%FTSE 100 - FallersAggreko (AGK) 1,773.00p -4.78%ARM Holdings (ARM) 1,001.00p -4.67%Royal Bank of Scotland Group (RBS) 335.10p -4.15%Anglo American (AAL) 1,586.00p -4.08%Rio Tinto (RIO) 2,924.00p -3.89%Evraz (EVR) 149.50p -3.80%GKN (GKN) 300.60p -3.62%Antofagasta (ANTO) 967.00p -3.49%Barclays (BARC) 322.50p -3.40%Hargreaves Lansdown (HL.) 1,000.00p -3.19%FTSE 250 - RisersBooker Group (BOK) 132.00p +1.77%PayPoint (PAY) 900.00p +1.12%BH Global Ltd. GBP Shares (BHGG) 1,245.00p +0.40%BH Macro Ltd. USD Shares (BHMU) 23.24 +0.39%John Laing Infrastructure Fund Ltd (JLIF) 114.50p +0.17%Phoenix Group Holdings (DI) (PHNX) 657.00p +0.15%3i Infrastructure (3IN) 132.00p 0.00%FTSE 250 - FallersHalfords Group (HFD) 352.00p -11.18%St James's Place (STJ) 580.00p -9.38%Salamander Energy (SMDR) 191.30p -6.68%Ferrexpo (FXPO) 181.00p -5.88%Man Group (EMG) 126.10p -5.54%AZ Electronic Materials SA (DI) (AZEM) 318.30p -5.38%Kenmare Resources (KMR) 31.21p -4.91%International Personal Finance (IPF) 526.50p -4.79%Hochschild Mining (HOC) 255.50p -4.59%Henderson Group (HGG) 172.30p -4.49%