London’s blue chip stocks were on the way down again today as investors worried were quick to de-risk ahead of the Greece referendum and big overnight losses in China.
The Shanghai Composite posted its third consecutive week of losses, and registered the deepest three-week fall in 22 years.
China’s main index fell 127 points to 3,786 despite government attempts to ease investor sentiment meaning about US$2.8trn wiped off the Composite in three weeks.
Bernard Aw at IG said: “Besides a slew of official initiatives, including rate cuts and loosening of margin trading rules, the Chinese government has been buying into A-Share this week, in a bid to stabilise the domestic markets.
He said, however, that steps to shore up the equity markets appeared to have done little to stem the bearish tide.
At the heart of the recent sell-off is deleveraging.
Since much of the China bull-run was driven by a surge in margin trading, the unwinding of margin loans saw the unravelling of the bull market.
This, Aw said, is why the government eased margin rules late Wednesday, allowing brokers to ‘reasonably’ rollover margin debts.
However, “For now” Aw said “the mood is verging on panic.”
As a result of the worrying events in China, miners led the way lower on the FTSE 100.
Anglo American (LON:AAL) and BHP Billiton (LON:BLT) were the biggest fallers, easing 2.5% to 895p and 1,241p respectively, while Rio Tinto (LON:RIO), down 2% to 2,580p, was also languishing near the bottom of the index.
Unsurprisingly then, the FTSE 100 was 25 points lower at lunch to 6,604 as news from China, coupled with uncertainty, as Greek citizens get ready for a referendum, hurt the index.
The vote, which takes place on Sunday, will decide on whether to accept bailout terms and is too close to call according to reports.
It wasn’t all doom and gloom however as Ashtead (LON:AHT) led the risers, climbing 1.4% to 1,074p.
Shares were back on the up after falling yesterday following a note from Merrill Lynch which suggested that United Rentals (Ashtead’s main competitor in the US) would likely have to cut capital spending in reaction to the strong dollar and its impact in US manufacturing.
Away from the index, Optimal Payments (LON:OPAY) revealed trading to end June remained strong as it continues to head to London's main market and FTSE 250. Shares jumped 16% to 254p.
In small cap news, troubled software group Ubisense (LON:UBI) issued another profit warning after more contract delays in its solutions arm. Shares lost 11% to 98p.
Meanwhile, Secure payments expert Eckoh’s (LON:ECK) proposed £88mln takeover of customer service provider Netcall (LON:NET) has fallen through.
Shares in Eckoh only lost 1.8% on the news to 39p, however, Netcall’s shares dropped almost 10% to 49p.
Conversely, Phorm Corp (LON:PHRM), the global internet technology firm, rose over 13% to 2.4p as investors hailed second quarter results, which showed higher revenues in Russia.
The company, which previously attracted criticism in the UK from privacy advocates, seems to have found acceptance in the US and Russia markets for its Internet ad-targeting platform.