A cautious start turned into a market-wide sell-off by the close of trade on Friday as nervous investors booked profits ahead of the weekend.
The UK's benchmark FTSE 100 index finished 52.93 points lower at 6,512.66, its worst closing level in three weeks. The last time it closed lower was on September 4th when it ended the session at 6,474.74.
"With the end of the quarter looming on Monday and political risks rising it would appear that investors could well be indulging in a little bit of portfolio adjustment and balancing into the end of the week today, and the end of the quarter, the other side of the weekend," said Senior Market Analyst Michael Hewson from CMC Markets.
Ongoing concerns about the US budget, uncertainty surrounding monetary policy on both sides of the Atlantic, as well as political battles in Italy continued to dampen spirits today with mining stocks bearing the brunt of the sell-off in London.
Housing stocks were also under pressure after Bank of England (BoE) Governor Market Carney said that he doesn't see the need to extend quantitative easing (QE) in the UK given the decent economic data as of late. "Mark Carney now feels it is time to put a cap on the QE programme. This has worried traders, as the next step will be to reduce the stimulus level," said Market Analyst David Madden from IG.
Meanwhile, Chancellor George Osborne said that BoE should have greater powers to prevent the 'Help to Buy' scheme from sparking a property boom. He said that the Bank's Financial Policy Committee (FPC) will make annual reviews of the scheme starting next year, instead of the first review coming after three years as previously expected.
Over in the States, conflicting comments from members of the Federal Reserve continue to grab the headlines in the aftermath of the central bank's surprise decision last week not to scale back QE. Fed Bank of Richmond President Jeffrey Lacker spoke on Thursday saying that he supported a scaling back of stimulus this month, while Charles Evans from the Chicago Fed said today that there is "a decent chance" that a 'taper' might not come until early 2014.
Budget negotiations in Washington continue to hammer markets with investors nervous ahead of the October 1st deadline, hoping that politicians can agree on a extension to the current debt-ceiling limit of $16.7tn to avoid a government shutdown when the new fiscal year begins. According to analyst Mark Zandi from Moody's Analytics, a three-to-four-week shutdown could shave 1.4 percentage points off US economic growth in the fourth quarter. He currently estimates an expansion of 3% without a government closure.
FTSE 100: Persimmon drops on Carney, Osborne comments
Housebuilder Persimmon was leading the downside on Friday after Bank of England (BoE) Governor Mark Carney said that he doesn't see the need for more stimulus to prop up the economy. Markets were also reaction to Persimmon's plans to halt building work in some parts of the south Wales valleys after the company said the sites don't generate sufficient profits.
Mining stocks including Antofagasta, Rio Tinto, BHP Billiton and Vedanta Resources were also providing a drag today bearing the brunt of reduced risk appetite. Rio was shrugging off some upbeat comments from Nomura which labelled it as "one of the cheapest stocks" within its peer group.
Randgold Resources and Fresnillo edged lower after Bank of America Merrill Lynch cut its gold-price forecast by 17% to $1,294 an ounce for 2014.
SABMiller and Diageo were under pressure after Credit Suisse downgraded the European beverages sector from 'overweight' to 'benchmark', saying it is the "third-most expensive sector in Europe [...] and has the second-worst earnings revisions".
Engineering group IMI was among the best performers after hiring former Weir boss Mark Selway as its new Chief Executive. He will take the reins from company veteran Martin Lamb who will step down at the end of this year after nearly 13 years at the helm.
Babcock, the engineering support services firm, edged higher after saying that trading in the first half ending September 30th has "remained positive". The company said it "will continue to make further strong progress and that results for the 2013/14 financial year will be in line with its expectations".
FTSE 250: Premier Farnell climbs on UBS comments
Shares in Premier Farnell gained strongly on Friday after analysts at UBS said that an acceleration of growth at the electronic components firm should be "around the corner". "Given forward indicators (e.g. PMIs) only improved from around May, with the normal six-month lag we note company growth should start to improve from November and so are unconcerned by the lack of acceleration seen so far," the bank said.
Housing stocks were falling heavily today after comments from Carney and Osborne prompted investors to take profits. Countrywide, Taylor Wimpey, Barratt Developments and Bellway were registering heavy losses by the close. Mining stocks were also lower including Hochschild Mining, EVRAZ, Kazakhmys and Centamin.
FTSE 100 - Risers
Sports Direct International (SPD) 713.00p +1.78%
Aggreko (AGK) 1,608.00p +1.13%
IMI (IMI) 1,469.00p +1.10%
BT Group (BT.A) 346.40p +0.96%
GKN (GKN) 352.10p +0.83%
Petrofac Ltd. (PFC) 1,410.00p +0.71%
Babcock International Group (BAB) 1,201.00p +0.67%
Carnival (CCL) 2,113.00p +0.62%
ARM Holdings (ARM) 1,010.00p +0.60%
SSE (SSE) 1,468.00p +0.55%
FTSE 100 - Fallers
Persimmon (PSN) 1,061.00p -4.33%
Antofagasta (ANTO) 830.00p -2.75%
Vedanta Resources (VED) 1,073.00p -2.72%
Rio Tinto (RIO) 3,067.00p -2.34%
Tate & Lyle (TATE) 738.00p -2.25%
BHP Billiton (BLT) 1,841.00p -2.23%
SABMiller (SAB) 3,165.00p -2.12%
Unilever (ULVR) 2,457.00p -1.92%
Anglo American (AAL) 1,540.00p -1.88%
Sage Group (SGE) 329.90p -1.79%
FTSE 250 - Risers
Moneysupermarket.com Group (MONY) 150.10p +4.53%
Premier Farnell (PFL) 216.70p +2.75%
Menzies(John) (MNZS) 809.00p +2.34%
Fenner (FENR) 398.90p +2.05%
Millennium & Copthorne Hotels (MLC) 552.00p +1.66%
Crest Nicholson Holdings (CRST) 335.50p +1.64%
RPS Group (RPS) 268.00p +1.63%
Thomas Cook Group (TCG) 147.50p +1.51%
888 Holdings (888) 165.90p +1.47%
Fidessa Group (FDSA) 2,012.00p +1.46%
FTSE 250 - Fallers
Hochschild Mining (HOC) 180.10p -6.15%
Countrywide (CWD) 518.00p -4.87%
Kazakhmys (KAZ) 273.90p -4.46%
Centamin (DI) (CEY) 45.35p -4.10%
Evraz (EVR) 128.00p -4.05%
Taylor Wimpey (TW.) 97.00p -3.87%
AZ Electronic Materials SA (DI) (AZEM) 299.40p -3.67%
Keller Group (KLR) 1,002.00p -3.19%
Barratt Developments (BDEV) 302.10p -3.08%
Bellway (BWY) 1,262.00p -3.07%