European markets found their Friday spirits knocked by wobbles across the pond, dropping for a second day as Wall Street plunged.
With US shares solidly in the red again at the European close, the FTSE 100 fell 0.9pc to 5,799.1, a comparatively gentle drop that was eased by a fall in the pound.
The continent’s stock indices have underperformed global rivals since the market ructions of February and March. The benchmark Stoxx 600 has lagged the MSCI world index by 15pc since March, and 10pc since June, despite major stimulus efforts by European governments – its worst overall underperformance in 30 years.
Analysts at Bank of America said they expected European equities to reverse their “recent sharp underperformance” in the near future. Investment strategist Sebastian Raedler said a recent rotation from the growth stocks which have underpinned the recovery into value stocks would prove beneficial for European equities. “We see scope for European equities to outperform by around 10pc into year-end,” he wrote in a note to clients.
About three quarters of London’s blue-chips lost ground yesterday, with travel firms, retailers and financial stocks rising.
Miners were the top performers on the FTSE 100, amid hopes for a continued global recovery in industrial production.
Anglo American, up 63.8p to £18.33, was the biggest riser, while Glencore and Antofagasta also gained ground.
Tobacco giant Imperial Brands rose 34p to £13.04, after analysts at JP Morgan upgraded their rating on the group from neutral to overweight, saying “severe downside risks” to its valuation had already been priced in.
Analyst Jared Dinges said the group’s new management team marked an “inflection point” for Imperial, while its momentum should improve heading into 2021. He set its price target at £16.50, about 30pc higher than Thursday’s closing price.
Housebuilders were the worst-performing sector, with Barratt Developments down 37.6p at 501.8p and Taylor Wimpey off 6p at 114.9p after the Competition and Markets Authority accused the groups of potentially mis-selling and misleading leasehold buyers.
Peer Berkeley dropped 173p to £44.75, despite saying its recent performance supported its expectations for £500m in pre-tax profit for the full year. The FTSE 100 group said it expected to be able to proceed with a £280m programme of shareholder returns following a “resilient” performance.
Thin end-of-summer news flows limited notable moves elsewhere, with reporting set to pick up again from next week.
On the FTSE 250, cruise operator Carnival rose for a second session, up 38p to £11.32, as the group’s Italian and German operations geared up to resume their services.
Stricken shopping centre operator Hammerson, fresh from an equity raise and news it will be relegated from the mid-caps, dropped 22.1p to 265.2p.