LONDON — Britain's top share index fell yesterday, paring the previous session's gains as investors worried about waning global economic growth and company earnings.
London's blue chip index was down 24.91 points, or 0.4 per cent, at 5,639.16 points in light volumes, having added 0.7 per cent on Tuesday as investors bought on the dips after two consecutive trading days of losses.
The fall tracked overnight losses for Wall Street, which has been in bearish territory since a disappointing set of US jobs figures last Friday. News from the euro zone's debt crisis and global growth engine China has also done little to lighten the mood.
A sales warning from engine maker Cummins Inc was the latest worrying signal from the US corporate sector overnight, on top of weak forecasts from chipmakers Applied Materials Inc and Advanced Micro Devices.
"There is an earnings per share risk at the moment and it will continue because there is just too much uncertainty going on," Edo Brasecke, strategist at Investec, said.
"The risk at the moment is that although the probability might be small if something does go wrong in Europe it is going to be massive so you can not really price it in to anything, so in the short-to-medium term the main players (portfolio managers) are just going to sit on their hands, which will increase volatility," he said.
UK-listed British luxury brand Burberry was the major local casualty yesterday, down 5 per cent, after the company reported a slowdown in quarterly sales growth as trading conditions worsened in its markets.
"What is more worrying is the slowdown at Burberry is being felt across the luxury brands industry, with the market further scaling back estimates for peers LVMH and Luxottica," Ishaq Siddiqi, a market strategist, at ETX Capital, says.
Shares in Burberry, Luxottica and luxury goods peer LVMH were trading at between 18.1 and 19.6 times the company's expected earnings for the next 12 months — a premium to the broader market at 17.1 — implying a 9.8-10.4 per cent compound annual growth rate in earnings per share, according to Starmine data.
ICAP was hovering near more than 2 year lows as the world's largest derivatives broker brought forward plans to slash £50 million ($77.5 million) of annual costs to counter a trading slowdown that forced the brokerage's revenue down 9 per cent in the last quarter. — Reuters