News from the US and China gets the better of the FTSE 100

Highlights:

• FTSE 100 slides by almost 3%
• Miners plummet on concerns of Chinese demand
• Decline is biggest single day drop in almost 2 years

Fresh news from the world’s two largest economies drove the FTSE down to a five-month low today, despite better-than-expected retail sales data for the month of May. Miners led the declines as concerns over the demand from China, the world’s largest consumer of metals, pinned the sector down.

After the FTSE 100’s close on Wednesday, the Federal Reserve released a statement confirming that they would be looking to slow down their monetary stimulus efforts by the end of the year, potentially bringing “QE3” to a complete close towards the end of the first half of 2014.

In China HSBC Holdings PLC released a preliminary report on the Chinese purchasing managers index which showed a reading of 48.3, well below the expected 49.1 that analysts had in mind. It is also worth noting that a score of less than 50 suggests that further contraction could still be on the cards for the world’s largest exporting economy.

While the data from China was entirely unexpected, the Federal Reserve’s actions regarding their QE program has been at the forefront of investors minds since May 22nd, when the central bank’s chairman, Ben Bernanke, let slip that they could begin turning off the $85 billion a month tap in the near future.

Investors put so much weight behind these two pieces of information from abroad the better-than-expected retail sales data for the month of May was completely overpowered as the FTSE 100 declined by more than 100 points by mid morning trading. The report showed an increase of 2.1 percent month on month and 1.9 percent year on year, beating expectations of 0.2 percent and 0.8 percent respectively. When taking into account fuel sales expectations were still clearly beaten with growth of 2.1 percent when compared to the same period last year and April 2013.

The FTSE declined by 189.31 points, or 2.98 percent, to close at 6159.51, it’s the lowest closing price since January and the biggest single day drop in almost 2 years. Miners led the declines with Polymetal International PLC sitting at the bottom of the index with a decline of 11.96 percent. Fresnillo PLC, Randgold Resources and Antofagasta PLC were also amongst the five worst-performing stocks of the day, registering losses of 8.09 percent, 7.49 percent and 5.18 percent respectively. BHP Billiton PLC, the world’s largest miner, just crept into the bottom 10 with a decline of 4.61 percent.

None of the London blue-chip indexes constituents had made a gain at the close of play, however Carnival PLC, RSA insurance group PLC and International Consolidated Airlines Group SA were the most resilient stocks, limiting declines to 0.58 percent, 0.66 percent and 0.79 percent respectively.