May proves a month of woe as the FTSE fall continues

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THE FTSE 100 suffered its worst month in more than three years in May, after data which suggested the US is struggling triggered a late sell-off.

Analysts believe the FTSE may be vulnerable to further declines as worries about the eurozone persist. The blue chip index finished the month 7.5 per cent weaker, a third straight month of losses and the worst performance since February 2009.

“What we are really seeing is the continuation of volatility. Those who are looking at shorter-term horizons are trading in cyclicals and looking to buy value stocks,” Daniel Harris, director and head of dealing at H2O Markets, said yesterday.

Mr Harris said Diageo had done well over the last few months, and it had not suffered too much even during a broader market correction. Charts continued to signal a bearish trend for the index.

“This longer-term down move is still in place. If it starts to break through Wednesday’s lows, that would suggest a bearish continuation on the daily chart and the index will be expected to retest a low of 5,250,” Lynnden Branigan, technical analyst at Barclays Capital, said.

“The bias is more on the downside.”

Gerard Lane, equity strategist at Shore Capital, said UK consumer discretionary companies such as Next and Mitchells & Butlers were doing relatively well and were expected to continue outperforming in an otherwise poor equity market.

He added: “Utilities in general are also a good place to go as they offer the right type of exposure when earnings risk elsewhere is rising.”

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