A shaky start to the fourth quarter

Equity markets began the first day of a new quarter in negative territory this morning, as fresh concerns emerged over the possibility of a sovereign default in Greece. Whilst large cuts were approved by the Greek cabinet for 2012 over the weekend, the 2011 budget deficit was estimated to be 8.5% of GDP, ahead of the 7.6% target set by the EU and IMF. The miss was blamed on a deeper than anticipated recession and highlighted the fragility of the European situation. European markets opened more than 2% lower as banking stocks were once again in the midst of the selling.

Commodity stocks also suffered, as copper fell to its lowest level since June 2010 on Chinese PMI data. Whilst the figure for September rose 0.3% to 51.2%, it failed to reverse concern over the slowdown in the Chinese economy.  UK PMI data provided an element of good news domestically; the reading of 51.1 was ahead of forecasts and showed a modest expansion in manufacturing activity. News form the US helped lift the FTSE 100 off its lows mid-afternoon, the Institute for Supply Management factory index increased to 51.6 in September, ahead of an anticipated 50.5.

Randgold resources topped the FTSE 100 leader board with a 3.7% gain as the spot price of gold improved by 1.6% to $1649 per ounce. It was followed by Sainsbury who benefited from an upgrade from hold to buy by analysts at RBS who cited a strong business model and a recent share price weakness.

Burberry was one of the worst performers on the day, the luxury goods maker hurt amid continuing concerns over a slowdown in China. Despite Goldman Sachs remaining bullish on the sector, the shares lost 7% to finish the day at 1092p. The FTSE 100 ended the day weaker by 53 points, or 1%, at 5075; not the start to quarter four that investors would have hoped for. 

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