Data pointing to slowing growth in the Chinese economy knocked already fragile risk appetite, denting commodity stocks and banks and pushing Britain's top share index to its lowest in nearly 10 months on Thursday, according to Reuters. By 0916 GMT, the FTSE 100 was down 58.47 points, or 1.2 percent at 4,858.40, having earlier reached its lowest since September last year, after gaining 0.1 percent on Wednesday. The blue chip index lost over 13 percent in the second-quarter, the worst such fall since the third-quarter of 2002 when the dot.com boom collapsed. The pace of Chinese manufacturing growth slowed in June as government steps to cool the property market and curb bank lending combined with a faltering global recovery to dampen sentiment. Risk sensitive banks were the biggest drag on the index as investors rushed to exit more cyclically geared positions. Barclays was the top loser in the sector, down 2.8 percent. Analysts cut earnings estimates for Barclays after the bank said late on Wednesday that investment banking conditions have weakened in the last two months. Analysts said that the growing doubt about prospects for global recovery were tempering expectations on the forthcoming earnings season. "Even if a double-dip recession is avoided, estimates for 30 percent growth in earnings in 2011 are starting to look very optimistic and it looks as though investors are getting their revenge in early," said Jeremy Batstone-Carr, head of research at Charles Stanley. Insurers which are heavily exposed to the equity market were also big losers with Aviva and Prudential down 3.2 and 3.0 percent respectively. ENERGY DRAIN Energy stocks were also weaker, under pressure as crude fell below $75 per barrel. Royal Dutch Shell fell 1.5 percent, while BG Group eased 0.8 percent, and BP shed 1.6 percent. Among midcaps, Wellstream was the top faller, down 12.4 percent after the British oil services firm warned an expected second-half recovery would be slower after the BP oil spill in the Gulf of Mexico caused uncertainty. This weighed on large cap peer Petrofac which fell 3.4 percent. Retail stocks were also among the biggest fallers, with Next down 3.8 percent and Marks & Spencer off 2.5 percent, as traders pointed out that increased wages in China will put pressure on import margins for clothing. Hotel group Whitbread and cruise operator Carnival, which are heavily dependent on discretionary spending were also under pressure, down 3.1 and 3 percent respectively. Markets will scrutinise developments in Spain, which will hold an auction for 5-year bonds later in the day. Analysts were optimistic about the sale, though Moody's warning over its top rating on Spanish government debt overnight could be a dampener. Domestically, Markit/CIPS UK manufacturing PMIs for June will be released at 0828 GMT. However investors will have more data to digest from the U.S. in the afternoon, with the latest weekly jobless claims, May construction spending, June ISM, and May pending home sales numbers all due for release ahead of Friday's U.S. jobs report.
