Britain's leading share index fell today, snapping a three-day rally amid worries about a slowdown in global growth after weaker-than-expected German GDP data, with commodity stocks the worst performers.
Investor worries that global growth was slowing down were compounded when German GDP dropped to 0.1 per cent compared to Reuters consensus forecasts of 0.5 per cent and was at its lowest since it posted a negative reading in the first quarter 2009.
Commodity stocks, whose performance is highly correlated to economic growth, were the main drag on the index.
Heavyweight oil stocks BP, Shell and BG Group were down 0.7 to 1.4 per cent, while miners Rio Tinto , Anglo American and Xstrata fell 1.7 to 2.6 per cent.
"We are back in negative territory after the rally," Peter Dixon, economist at Commerzbank, said. "German growth disappointed and that is going to weigh on the market. "It has punctured the already fragile confidence."
Gold miner Rangold Resources, however, was in the FTSE 100 best performers list, up 0.7 per cent, tracking firmer spot prices for gold, which is seen as a safe haven.
The FTSE 100 index down 60 points, or 1.1 per cent at 5,290.06 after rallying for the past three session from being "oversold" following hitting a one-year closing low on Wednesday.
Automotive and aerospace parts group GKN was also hit by the German GDP data to become the worst performer on the index, down 2 percent after auto stocks dropped on the figures.
Investors will be watching the meeting between French president Nicolas Sarkozy and German chancellor Angela Merkel today to discuss what action needs to be taken in order to contain the euro zone debt crisis.
But officials have said that euro bonds - seen by experts as a possible solution - would not be discussed.
Banks which have badly hit by worries the euro zone debt crisis is spreading were also standout losers, with the down 1.2 per cent.
A BofA Merrill Lynch monthly fund management survey showed European investor sentiment has fallen sharply on concerns the euro zone debt crisis is spreading and the corporate and economic outlook drops to a level not seen since March 2009.
"While this mirrors moves in other regions - notably the US - sentiment in Europe is now much the worst of any region and this looks overdone - potentially setting the stage for an equity rebound, particularly viewed together with the high cash levels seen in the global survey, which have triggered our contrarian buy rule," Merrill Lynch said in a note.
Reuters
