FTSE indices were mixed intraday, as the FTSE 250 fell another 2.37% while investors continued to re-evaluate equities deriving earnings from the UK. This puts the secondary index down over 4.40% for only the first two days of the week. Trade was slightly off overnight across Asia, as Brent crude traded lower throughout the day, trading c. $47.88/bbl into the London close.
Investment managers suffered as a late news story yesterday panicked investors in UK property, prompting Standard Life (-5.20%) and Aviva(-3.94%) to trade lower, along with a handful of REITs. This was as news emerged Standard Life’s UK Physical Property Fund would be ‘suspended’ meaning the open ended fund would be closed to redemptions, halting retail investors from selling out of the property fund and recouping monies. The £2.9bn commercial property fund will have to sell properties to raise cash before any money can be redeemed. A futher suspension was enacted by Aviva on its UK Property Trust in late lunch due to ‘lack of immediate liquidity’ followed by a very similar announcement by M&G regarding its UK Property Portfolio. Moves from Aviva and M&G followed central banker Carney’s comments to the effect that any such suspension of investments is to be expected given the illiquidity of the underlying assets, but seems to have provoked a little panic from investors.
Sterling weakened further against both the euro and dollar, as the relief rally across most asset classes seen last week dissipated this week. This was prompted in part by weaker than expected PMI data, as the June services PMI came in at 52.3, below estimates of 52.9 and a recent May PMI read of 53.5. This indicated, along with last week’s manufacturing PMI data that the pace of UK economic growth slowed to just 0.2% in the second quarter, the overall sentiment pushed the pound to a 2.5 year low at 0.8490 per euro, and down to US$1.3130.
At the close European indices were mixed with the FTSE 100 +0.35%, with the CAC 40 -1.69%, and the DAX 30 -1.82%.