The FTSE 100 Report

FTSE 100 to head below 47000 says one investment bank, UK 100 contains losses after rating agency warning

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Category: The FTSE 100 Report

Published on Tuesday, 06 December 2011 09:52

Written by Sam Coventry

It comes as little surprise that S&P has taken to carpet bombing eurozone members as it’ll hopefully be the lick up the proverbial that European leaders have needed.

The FTSE 100 (INDEXFTSE:UKX) is 0.39% lower on the day at 5,546.31 at 9:30 AM in London.




Markets reacted negatively to credit rating agency S&P’s announcement that they’ve got all but two of the eurozone nations debt markets marked for a possible downgrade within three months. 

"It comes as little surprise that S&P has taken to carpet bombing eurozone members as it’ll hopefully be the lick up the proverbial that European leaders have needed.  Over the past few weeks bond auctions have hardly been impressive and in the run up to Christmas there’s almost another €20 billion or so of German, Italian and Spanish bonds to flog to investors," says Simon Denham at spread bet company Capital Spreads.

Also catching attention this morning is news from analysts at Goldman Sachs.

Within three months, Goldman believes that the FTSE 100 could sink to 4,700 before climbing back to 5,400 within six months' time and rallying to 5,800 by the end of 2012.

"We believe that equities across Europe need to discount a deeper economic downturn and more downward earnings revisions," said strategist Sharon Bell.

"However, we do expect a trough at some point in early 2012." While predicting that the eurozone economy could shrink by 0.8% next year, Goldman Sachs forecasts that the UK could prove more resilient and grow by 0.7%.

The broker added that the FTSE 100 should also benefit from its international exposure and continued rising commodity prices.

Nevertheless, we’re seeing a bounce from the FTSE 100 which was called at one point to be opening almost as low as 5500 but this early bounce shows that many investors are happy to brush aside the comments from S&P and continue to look ahead to Thursday and Friday where expectations are building.