FTSE loses 1 5 as miners and financials weigh and investors digest EU Summit

The FTSE 100 lost around 1.5% in trading on Monday as stocks reversed Friday’s gains after EU Summit relief rally fully waned and investors refocused their gaze on the fact that there remain deep concerns over the ability of the EU to address near term pressures on sovereign bond yields, whilst a profit warning from bellwether US stock Intel also hurt sentiment.

We have seen a complete reversal of the relief rally that was triggered on Friday after European leaders announced new measures to create a fiscal union with investors taking profits early and selling out of heavyweight financial stocks.

Investors have been quick to reverse positions built up on Friday and that tells a tale that the EU Summit has failed to address the crisis of confidence that has engulfed both bond and equity markets, keeping heavyweight stocks under pressure and investors on the back foot for the new trading week.

Comments from ratings agencies over the last 48 hours also emphasises the fact that in truth, little had changed to address the near term concerns over the euro crisis with the output of the EU Summit and this put investors in risk aversion attitude today.

News from across the pond also hurt UK stocks today, after bellwether blue chip firm Intel warned its shareholders that its fourth quarter results would miss previous forecasts after supply shortages meant it failed to meet demand. Whilst the warning itself kept a negative tone in the markets with regards to sentiment, the warning was dictated by supply shortages by the flooding in Thailand and therefore it is hoped that this is more of a short term effect, than indications of a longer term trend in profit warnings.

Risk aversion
A quick look at the performances of stock sectors today tells a tale of risk aversion from investors. Heavyweight and more risky mining and banking sectors lost over 3% whilst at the same time the typical defensive sectors; tobacco and pharmaceutical stocks, traded broadly flat to positive on the day.

With the US dollar also gaining strongly on the day, this marks a trading day whereby investors stood on the back foot and looked to move their investments into safer haven areas which are less volatile with regard to the euro crisis and slowing global growth. This could also be perhaps the first steps of investors towards leaving the market for the Christmas holiday season before returning in the new year.

The FTSE 350 banking sector lost over 3% in trading with stocks such as Lloyds Banking Group and RBS the heavyweight fallers on the FTSE 100, losing over 6% as a result.

Mining stocks were also a key drag on the UK Index, after Copper prices were pressured lower by a rising dollar, with stocks such as ENRC, Fresnillo and Antofagasta losing between 5% and 6% on the day.