The FTSE hit a five-week low first thing this morning as stocks across Europe and Asia dropped and energy firms took a hit.
By 9.20am (London Time) the FTSE had dropped 1.1% to 5220.78, but managed to regain some ground to reach 5233.43 (-0.82%) by 10.30am. Investors have been taking a cautious attitude today, with many waiting on news from the US later today.
In the energy sector, the biggest losers were Tullow Oil, down 4.61% to 1160p and Cairn Energy, which lost 3.13% at 324.5p. Other losers included Man Group, down 4.60% at 251p and Compass Group, which dropped 3.38% to 429p, while Wolseley was down 2.79% at 1395p.
Miners also suffered as a result of a drop in Asian stocks prompted by rumours of a credit clampdown in China. Rio Tinto also declined for the sixth day in a row, sinking 1.2% to 3147.5p, while Xstrata dropped 3% to 1052p. Steven Bell, director at hedge fund GLC said: 'The bad news that allegedly sparked the fall was China moving the reserve ratio, but that was just the implementation of what was announced last week so it shows that the market has got a bit nervous.'
The morning's wins were modest, and included aerospace firm Cobham which gained 1.08% to reach 233p; Imperial Tobacco Group, which rose 0.59% to 2042p; and Schroeders which gained 0.40% at 994p. Vodafone also saw its price rise to 135.3p (+0.33%) while British Sky Broadcasting Group was up 0.27% to 551p.
All in all, it seems that investors are holding out for this afternoon's news from the Fed at 2.15pm (London Time). Expectations are that US policy makers will have decided against continuing debt purchases in the housing and money markets beyond March. However, analysts are still expecting a cautious approach. Alan Skrainka, chief market strategist for Edward Jones and Co. says: 'It's still too early to expect a dramatic announcement with regard to the Fed's exit strategy because the economy is still finding its footing. It’s a delicate balancing act. If the Fed pulls back too soon, the economy falters. If the Fed waits too long, the inflation risk grows.' Sung Won Sohn, former chief economist at Wells Fargo stresses that: 'The important thing for them is not to rock the boat and leave themselves plenty of flexibility so that in February and March they can alter their position if they need to.'
