Britain's top share index closed at its lowest level in three months on Friday after a huge earthquake in Japan knocked investors' confidence. Violence in Libya and high oil prices have already pushed some investors out of equities into assets perceived as better placed to withstand tough economic conditions.
Records biggest weekly fall since July The earthquake and tsunami in Japan that has killed at least 1,000 people added to that caution. The FTSE 100 closed down 16.62 points or 0.3 percent at 5,828.67. The index was down 2.7 percent on the week, its biggest such fall since July.
Traders also highlighted a relative lack of activity in the market as evidence that investors lacked conviction. "The big money seems to be standing on the sidelines, there's not enough selling momentum to push it much lower, and it may take another macro shock to push it lower," said Darren Sinden, senior sales trader at Silverwind Securities.
Life insurers Prudential, Aviva and Standard Life fell 1.5 to 1.9 percent after the biggest earthquake on record hit the north-east coast of Japan triggering a 10-metre tsunami. Analysts said Lloyds of London insurers such as mid-cap Catlin, down 4.5 percent, could be most exposed to the disaster. Banks, which fell on Thursday after Moody's cut Spain's credit rating, slipped again as European ministers met to tackle the debt crisis. Inflation worries persisted in the UK as factory gate inflation rose to its highest annual rate in more than two years in February.
Home Retail, down 1.5 percent, suffered a series of broker downgrades after a profit warning and grim forecast for 2011-12 on Thursday. "Once interest rates begin to rise you can almost kiss the (retail) sector goodbye," Paul Kavanagh, partner at Killik & Co said.
Miners which suffered sharp falls in recent days recovered some ground, but still ended the week 7 percent lower as copper and other metals fell sharply. Technical indicators painted a less gloomy picture as the index closed above the 50 percent Fibonacci retracement between a November low and its February high around 5,810.
Phil Roberts at Barclays Capital and Dominic Hawker at Arbuthnot said this signalled technical support was holding well. "You have the mega-cap names finding good medium-term support, so bottom up the market's looking fairly broad, and I think that's going to be supportive," Hawker said.
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