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Ongoing political tension drags FTSE down

The continuing political tensions in Ukraine kept investors on the sidelines as attention also turned to economic prospects in the United States.

A rollercoaster start to the week, in which the FTSE 100 Index dived 1.5% before rebounding the next day, was followed by more normal activity after Vladimir Putin said Russia was not seeking to escalate the conflict.

However political tensions seem far from over and with China promising sweeping reforms to ensure sustainable growth in its slowing economy the FTSE 100 Index slipped back 48.3 points to 6775.4.

The Dow Jones Industrial Average was also down at the time of London's close, after figures showed a slowdown in expansion in the US service sector. In contrast, a robust reading for the same sector in the UK fuelled expectations that overall growth in this country could nudge 3% this year.

That would increase the pressure on the Bank of England to act on interest rates, although policymakers are expected to keep the cost of borrowing at a record low of 0.5% for the 61st month in a row on Thursday.

The releases meant the pound strengthened against the US dollar and euro at 1.67 and 1.22 respectively after the latest positive news from the UK economy.

In the FTSE 100, the risers board was led by car insurer Admiral after it reported a 7% rise in annual profits to £370 million and admitted its results were "solid, but not flashy" following another fall in industry premium rates. Buoyed by falling claims costs and better profits at its price comparison site Confused.com, Admiral lifted its dividend to shareholders by 10%. The stock rose 7% or 107p to 1526p,.

RSA Insurance was up 1.9p to 97.8p on speculation that Warren Buffett is to invest in the firm and after HSBC lifted its rating on the back of plans for a City fundraising by new boss Stephen Hester.

In other results, Asia-focused bank Standard Chartered fell 26.5p to 1248p after it reported a 7% fall in 2013 operating profits and said uncertain conditions in emerging markets meant its first-half performance was under pressure.

The biggest top flight fall of the session was Melrose Industries, an investment company specialising in the turnaround of underperforming companies.

It posted higher profits and raised its full-year dividend, but the results update prompted Investec Securities to cut its target price on the stock.

Shares fell 25.5p to 302.4p after Melrose also highlighted potential headwinds from the current strength of sterling.

The biggest FTSE 100 risers were Admiral, Randgold Resources ahead 169p at 5050p, RSA Insurance and British American Tobacco ahead 38.5p at 3325p.

The biggest fallers were Melrose Industries, Meggitt off 19.9p at 486.6p, Rio Tinto down 112.5p at 3269p and TUI Travel off 14.9p at 435.1p.

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