Interactive Investor

FTSE 100 gives up gains after Barcelona attack

18th August 2017 12:07

David Brenchley from interactive investor

What a difference a night has made for the FTSE 100. At close of play Thursday, the blue-chip index had made up a chunk of last week's losses as the war of words between US president Donald Trump and North Korea's leader Kim Jong-un seemingly cooled.

Trump's "fire and fury" threat to North Korea last week wiped almost $1 trillion off global equity markets, according to Guy Stephens, technical investment director at Rowan Dartington, as investors duly fled to "safe haven" assets like the Swiss franc, Japanese yen and gold.

While clearly an unsavoury incident, events last weekend in Charlottesville, Virginia, worked to distract Trump from North Korea, Stephens adds. That was welcome news for investors, as global stock markets, including the FTSE 100 index, opened Monday in positive territory.

As of Thursday, less than a fifth of the FTSE 100's constituents were in the red and the index closed up 1%, spurred on by positive data on unemployment and wage growth.

Airline stocks lead the way, while sterling weakened 1.1% against the US dollar.

The good news did not last long, however, and it was, once again, events overseas that halted the FTSE's rally. A terror attack in Barcelona's Las Ramblas district, popular with tourists, killed 13 and injured more.

Overnight the US's main index, the S&P 500, slipped 1.5% to its lowest level in over a month after the White House was forced to deny that Trump's economic advisor, Gary Cohn, had resigned.

By midday, the FTSE 100 was down 1%, leaving it trading at 7,314 – just 4 points, or 0.05%, up on the week. Only four stocks – led by gold miner Randgold Resources – gained ground Friday, with travel groups hit by the events in Barcelona.

Airlines easyJet and British Airways owner International Consolidated Airlines retraced by 2% each, while InterContinental Hotels, which operates the Crowne Plaza and Holiday Inn brands, was down 1.6%.

The former two, though, are still up on the week as a whole by 1.88% and 1.37% respectively and the FTSE 100's biggest gainer was competitor TUI, which is up 8% for the week and only lost 0.34% today.

Newly merged Standard Life Aberdeen, now the second-largest asset manager in Europe with £670 billion in assets under management, put on 4.4% after being given the thumbs up by Barclays analysts.

Miner Glencore sits in between those two in second place for the week, up 5.4%, with Mondi, Micro Focus (both up 4.4%) and Old Mutual (4.1%) following closely behind.

In contrast to Thursday, almost half (44%) the FTSE 100 had lost ground in the week to Friday, with Schroders failing to budge either way.

Insurer Admiral was the worst performer, down 8.4%, after half-year results that were overshadowed by the controversial change in the Ogden discount rate. There was also read across to other names in the sector, including Direct Line (-3%).

Retail stocks were also big losers late in the week, despite UK retail sales volumes rising by 0.3% for the second successive month in July. Next, Kingfisher and Marks & Spencer, down 5.9%, 5.1% and 3% respectively, were at the bottom of the chart.

A downwards revision to June's initial 0.6% increase limited upside news, according to Investec analyst Victoria Clarke, while fellow broker Liberum also pointed to a heavy contribution from food to the growth. "Clothing also showed its recent strength to be unwinding following more average weather," Liberum said.

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