Worst week since 2016 for FTSE as market remains

Trinity Mirror jumps after deal to buy ‘Daily Express,’ ‘Daily Star’

LONDON (Reuters) – British stocks dropped on Friday, posting their worst week in two years as a global selloff pulled down shares in the most volatile sectors.

The FTSE 100 was down 1.1% at 7,092.43 points at its close, having earlier in the week suffered its worst losses since the Brexit vote. The index was down around 9% from its record high hit on January 12.

The biggest question facing the market was whether the correction marked the start of a bear market.

“If we look at other indicators it doesn’t look the case,” said Rory McPherson, head of investment strategy at Psigma Investment Management in London.

“Interbank lending rates are still pretty low, credit spreads have moved up slightly from record lows but haven’t blown out, and earnings season is coming along pretty well,” McPherson said. Equity markets sold off because stocks were overbought and slightly over-valued, he said.

Energy and financials were the biggest weights on the index on Friday, knocking around 35 points off the index.

Investors said, however, that domestic bank stocks would probably get support in the medium term from the Bank of England’s saying on Thursday it would raise rates sooner and by more than it thought three months ago.

Chemicals firm Johnson Matthey fell the most, 4.3%, after rival Umicore raised €892 million to fund capacity growth.

Merger and acquisition news shook up the small-cap market.

Trinity Mirror shares jumped 9.6% after the publisher of the Daily Mirror agreed to buy two rivals, the Daily Express and Daily Star.

Shares in British business travel company Hogg Robinson shot up nearly 49%, leading the small-cap index, after saying it got a takeover offer from American Express’s global business travel unit and had agreed to sell its payments technology business to Visa.

Materials stocks such as Fresnillo and Rio Tinto gained ground and Direct Line jumped 2.7% after saying that 2017 profit would beat market expectations.

Valuations across European stocks and UK stocks fell after this week’s losses. Volume has been heavy during the week, with some 1.4 billion UK shares trading on Tuesday, the most in nearly five months.

“The UK market trades on around 14 times next year’s earnings, which is good value,” McPherson said.

The Bank of Israel on Friday set its representative rate for the British pound at NIS 4.9070.