The UK’s FTSE 100 plummeted below the 5000 mark on Friday morning as fears of a double-dip recession in the US and across the EU continued to dominate investor sentiment.
It made a recovery though to trade up 14 points at 3.45 pm (London time), helped by a rally in mining shares chiefly gold and silver giant Fresnillo (+9.18%). However, it was the share price of the software company Autonomy that was leading the way, up by a substantial 73.34% after it was acquired by HP.
It follows what has been another dramatic week on the world’s financial markets.
Earlier in the week…
The better-than-expected GDP data from Japan rallied Asian markets and so too the FTSE 100 on Monday, which started the week in a positive manner ending up 30.55 points at 5350.58, despite continuing weaknesses in the banking sector. The Dow Jones added a more robust 213.88 points to finish at 11,482.90.
Tuesday, and the FTSE 100 stayed positive, but only just, adding 7.05 points to close at 5357.63 but the Dow Jones lost -76.97 points to 11,405.93. Investors were hoping to see evidence of firm leadership from within the EU following very poor GDP figures from across the eurozone on Tuesday. President Sarkozy and Chancellor Merkel held a media conference after their meeting on Tuesday afternoon and the two announced a proposal for a new economic government for the eurozone made up of all the member heads of state and to be led by an elected president. A new financial transactions tax was also tabled.
The FTSE 100 closed down 26.03 points at 5331.60 on Wednesday, as bank stocks such as Barclays (-4.2%) outweighed mining stocks, such as Eurasian Natural Resources (+3.7%). The Dow Jones gained just 4.28 points at 11,410.21. Investors were nervous but there was no evidence, at this point, of the extreme volatility seen last week.
And then, Thursday. Analysts at Morgan Stanley downgraded their global GDP growth forecast to 3.9% from 4.2% and its 2012 forecast to 3.8% from 4.5% before adding that they thought that the US and the eurozone were ‘dangerously close to recession’ because of ‘recent policy errors’. It was an unambiguous statement in what had been a pretty directionless week, and, it was what everyone was thinking. Investors pressed the panic button. Global stock indices went into freefall and the FTSE 100 ended Thursday 239.37 points down and the Dow lost 419.63 points.
UK: Inflation ticks up; unemployment rises; a surprise in the MPC minutes
Tuesday, and according to the Office for National Statistics (ONS) CPI inflation in the UK rose to 4.4% in July from 4.2% in June, while the RPI figure was unchanged at 5%.
The total jobless rate in the UK moved up from 7.7% to 7.9% according to figures released by the ONS on Wednesday; the total number of unemployed climbed by 38,000 to 2.49 million.
According to the latest Monetary Policy Committee minutes released this week all the nine members voted against an interest rate rise. And the latest retail sales figures from the ONS, out on Thursday, showed just a 0.2% growth for July after increasing 0.8% in June.
US: Negative manufacturing surveys; initial jobless claims back up; inflation rises
On Monday, the New York State manufacturing general business conditions index fell to minus 7.7 from minus 3.7. And there was more bad news to come for US manufacturing on Thursday as the Philadelphia Fed’s latest index of manufacturing activity fell to a negative of 30.7 in August from a positive 3.2 in July. That’s the lowest point it’s been since March 2009.
Despite these figures industrial production in the US climbed 0.9% in July from 0.4% previously.
According to figures from the Labor Department on Thursday, initial jobless claims climbed back above the current benchmark level of 400,000 at 408,000. The consumer price index in the US rose to 0.5% in July, up 3.6% from a year ago.