The Times has reported that Britain’s blue-chip shares suffered their sharpest daily losses for nearly 18 months yesterday, putting the FTSE 100 index on course for its worst monthly performance since the bear market ended two and a half years ago.
In the latest in a series of rocky trading sessions that have turned this month into a “red October” for the FTSE, the blue-chip benchmark tumbled 96.1 points, or 1.8 per cent, to close at 5,167.8, its lowest since the end of June. The 100 index has dropped by 5.66 per cent, or nearly 310 points, over this month’s 13 trading days.
The falls came coincidentally on the eighteenth anniversary, to the day, of the 1987 stock market crash.
With the scale of yesterday’s losses not seen since a 9.5 per cent drop during January 2003, fears will be fuelled that the long rally that began in spring 2003 may be running out of steam.
Investors’ sentiment is being hit by soaring energy costs, worsening domestic economic prospects, and anxieties over the repercussions for Wall Street of further expected increases in US interest rates. But some equity strategists said that the FTSE’s rough ride this month may not last and that UK blue-chip shares now looked oversold. They pinned the blame for October’s woes on profit-taking by institutions eager to cash in on the market’s recent upward march.
“The conclusion I draw from this is that this is not a fundamental reaction — this is not saying that there is a significant change in what has been underpinning the drive in equity markets,” Mike Lenhoff, of Brewin Dolphin, the City brokerage, said. “You will get occasions like this when the market just gets tied up in a knot. It’s quite possible that we will recover most if not all of the ground we’ve lost in the coming months — it’s my expectation.”