Investors were already nervous about peaking share values before a series of explosions hit Madrid on Thursday morning sent their appetite for risk through the floor.
The reaction on stockmarkets around the world since then has in many cases eradicated gains made in the first two months of the year.
For example, the Dow Jones Industrial Average index is now 3% below the level at which it started 2004, even though it has returned 34% over the past 12 months.
However, stocks in the index of the largest US firms dropped by almost just as much on Wednesday as they did on Thursday, indicating the depth of unease about existing share price levels, even without including the risk premium associated with terrorism.
The S&P 500 index is still up 37% over 12 months, according to Bloomberg data, but yesterday lost enough points to put it 5 down on the first trading day of 2004.
Closer to home, the FTSE 100 is down about 110 points to 4,436 since last Friday’s close. Most of the fall came in yesterday’s sell-off in reaction to events in Spain.
Just 14 stocks are up on their close of last Friday, led by Associated British Foods after it bought the Mexican edible oils business from Unilever, resulting in an analyst upgrade and a near 3.5% share price gain over the week.
Insecurity has boosted the defensives, with Tesco and BAT among the few making gains against the headwind – up 0.7% and 0.3% respectively.
At the other end of the performance table, British Airways dropped more than 14% after forecasting rising costs and analysts said air travel could be hurt by what took place in one of Europe’s biggest tourist markets yesterday.
Insurers were hit by a wave of regulatory proposals in published reviews, starting on Monday with the Penrose Report into Equitable Life and following through on Thursday with Parliament’s criticism of the industry’s handling of endowments customers.
Royal & Sun Alliance led the FTSE 350 Insurance index down with a 14% fall. Aviva dropped 7.5%, Friends Provident shed 7%, Pru fell 5% and L&G lost 4%.
Mid-cap stocks continue to outperform big-caps, and the FTSE 250 still remains above the level at which it started the year – and remains more than 63% up over the year.
190 of the index’ constituents are up since the start of 2004, although just 50 made gains in the past week.
Cairn Energy easily outperformed following stellar results and more oil strikes, sending its market value up nearly 30%.
Eurotunnel is down more than 13%, in part because France’s finance minister says the company cannot expect a state bailout from its huge debts.
Next week sees a raft of consumer-facing stocks, such as Kingfisher and WM Morrison report results, which should give some idea of the resilience of UK consumer confidence.IFAonline
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