FTSE falls 1% as US hints at further intervention

The FTSE 100 is down 0.9% at 5,528 with its three largest companies, HSBC, Vodafone and BP all showing losses of more than 1% as investors were spooked by the Federal Reserve's statements about further intervention in the US economy.

Last night the US Federal Reserve suggested more intervention to boost the US economy.

The Federal Open Markets Committee said that it was ‘prepared to provide additional accommodation if necessary’. This was interpreted as another round of asset purchases.

Paul Dales, US economist at Capital Economics said: 'The Fed still appears some way from embarking on a second round of asset purchases.

'For that to happen, economic conditions would have to deteriorate much more significantly and deflation would need to be imminent. Even then, more asset purchases wouldn't prevent a number of years of lacklustre economic growth, sustained high unemployment and low inflation.'

HSBC, which makes up 8% of the index, was down 1.10% at £6.63p. This morning it was reported that the bank's chief executive, Michael Geoghegan, threatened to leave if he wasn't made chairman.

The FTSE 100 fallers included life insurance company Aviva which went ex-dividend today – when the right to the next round of dividend payments will not go to new shareholders – this tends to pull prices down.

Analysts at BNP Paribas took a negative view of Aviva, Legal & General and Old Mutual which hit the companies’ share prices.  

The company published research this morning saying Europe faces a $2.5 trillion pension shortfall. Aviva shares are down 3.48% at £4.02.  

Gold miners led the FTSE 100 this morning boosted by gold prices and plans to float a new £2.6 billion gold miner on the LSE.

Investors are waiting to see the minutes of the last Monetary Policy Committee meeting to see what arguments were made for keeping interest rates at their current level of 0.5%.

The Russian steel company Severstal said it aimed to float its gold division with an expected value of £2.6bn. Most of its assets are in West Africa and Russia. African Barrick shares were up 2% at at £5.99 and Randgold Resources was up 1.6% at £64.10.

Imperial Tobacco was also up 1.6% after saying it was trading inline with expectations and that tobacco net revenues were expected to be up around 3% over the year.