Poor U.S. data sends FTSE to 7-week closing low

By Dominic Lau

LONDON (BestGrowthStock) – Britain’s top share index fell to a seven-week closing low on Wednesday on growing unease that the global economy may slip back into another recession following further weak economic data from the United States.

New orders for long-lasting U.S. made goods rose far less than expected in July and, excluding transportation equipment, posted their largest decline in 1-1/2 years, while new U.S. single-family home sales unexpectedly fell last month to set their slowest pace on record.

Also illustrating concerns over global growth, the world’s largest miner BHP Billiton (BLT.L: ) said it was cautious on the short-term outlook and the economy in China, its biggest customer, would slow from recent highs.

Shares in BHP, which reported bumper results on Wednesday, fell 2 percent, while the sector (.FTNMX1770: ) lost 1.8 percent.

However, robust company earnings helped limit the losses on the FTSE 100 (.FTSE: ), which closed 46.55 points or 0.9 percent lower at 5,109.40, after trading as low as 5,070.94.

“I am not an advocate of a double-dip recession, but expectations have got to be managed down about the speed and scope of the recovery. We’ve still got very tight lending conditions in the UK,” said Tim Whitehead, head of portfolio services at Redmayne-Bentley. “The issues with Greece, Portugal and (euro zone) peripheral nations have not gone away. I just sense the market as a whole is feeling a little bit uneasy.”

A one-notch downgrade of Ireland’s credit rating by Standard & Poor’s also weighed on sentiment as it reignited concerns over sovereign debt issues at euro zone peripheral economies.

Tullow Oil (TLW.L: ) sank 4.6 percent, the second biggest faller on the FTSE 100, after saying development of its Ugandan oil fields would be delayed due to a spat between the government and its former partner.

SAFE HAVEN

Other oil producers’ shares also fell on a weak demand outlook. BP (BP.L: ) and Royal Dutch Shell (RDSa.L: ) dropped 0.6 and 1 percent, respectively.

Economically-sensitive banks (.FTNMX8350: ) fell 1.1 percent, with Barclays (BARC.L: ) down 3.6 percent.

As investors sought safer shelter, the yield on the 10-year British gilt hit an all-time low of 2.790 percent. By comparison, the UK blue chip index offered a dividend yield of 3.54 percent, Thomson Reuters Datastream showed.

“The economic figures look bad. Corporate earnings were good but will that last?” a trader said. “The lack of volume is making traders mad.”

Volume on the UK benchmark, which has fallen 5.6 percent this year, was about 74 percent of the 90-day daily average.

Outsourcing company Serco (SRP.L: ) climbed 4.8 percent after it said half-year pretax profit was up more than 20 percent, defying concerns that support services companies will suffer from government spending cuts.

Car insurer Admiral Group (ADML.L: ) advanced 2.7 percent, the second biggest gainer on the FTSE 100, after it posted better-than-expected interim profits.

On the other hand, Aggreko (AGGK.L: ), a temporary power provider, shed 5.8 percent as expected upgrades to full-year forecasts failed to materialize after its first-half results.

Earnings momentum for FTSE 100 companies may be slowing. An equal number have had their 12-month forward earnings per share forecasts upgraded and downgraded by analysts since last month, according to Datastream.

For the mid-cap FTSE 250 (.FTMC: ), 98 companies have had their 12-month forward EPS mean upgraded by analysts since last month, versus 93 downgraded, Datastream showed.

(Editing by David Holmes)

Poor U.S. data sends FTSE to 7-week closing low