U.K. banks drop on downgrade fears, FTSE off
LONDON (MarketWatch) -- A possible looming downgrade of U.K. banks weighed on the FTSE 100 index on Thursday, while sluggish Chinese and U.S. macroeconomic data drove miners and oil firms deep into the red.
The FTSE 100 index (UKX) slipped 1% at 5,566.36, breaking a four-day winning streak.
Resource firms added the most weight in the U.K. index, following a further deterioration of manufacturing activity in China in June. A preliminary reading of the HSBC Purchasing Managers' Index dropped to a seven-month low and showed further contraction in business conditions at factories. Read more on China manufacturing weakening further in June.
Energy stocks were also under pressure, marked by oil prices dropping below $80 a barrel.
Tension from Spain also spilled over to other European bourses, as investors fretted about independent audits of the country's banking sector to be released after the market close. The auditors studies' showed that the banks may need between €16 billion and €62 billion for recapitalization, the latter amount being the worst-case scenario.
News from the United States, or a lack thereof, further added pressure on sentiment after the U.S. Federal Reserve on Wednesday didn't bolster market hopes of another significant round of quantitative easing amid weak economic growth.
Banks also were under pressure as news reports said that
U.K. stocks shook off better-than-expected data on retail sales for May, which showed a 1.4% rise compared with April, according to the Office for National Statistics. On an annual basis, sales rose 2.4%. Read more about U.K.'s May retail sales beating expectations, up 1.4%.
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