G4S drops as FTSE sinks to one-month low

By Tricia Wright

LONDON (Reuters) – The FTSE 100 fell to a one-month low on Wednesday, led down by G4S after the security firm agreed a settlement with the government over an offenders’ tagging scandal.

G4S sank 5.3 percent in brisk trade after agreeing to repay 108.9 million pounds to the British government after overcharging it on a contract to tag criminals.

The repayment, much higher than the 24 million pounds G4S offered in November, came as G4S posted annual profits below market forecasts and outlined a raft of heavy charges, with analysts saying they expected 2014 profit forecasts to be cut.

“Reading between the lines through their statement today it looks like 2014 will … be another challenging year,” Vinay Sharma, trader at Gekko Global Markets, said.

“A break below the year-to-date low of 226 pence could spark a wave of selling pressure down to the low seen last summer at 203 pence.”

Trading volume in G4S – which closed on Wednesday at 232.5 pence – came to around 3-1/2 times its 90-day daily average. Turnover on the blue-chip FTSE 100 index was just above its regular daily volume.

The UK benchmark, which had fallen in the last three sessions, ended down 64.62 points, or 1 percent, at 6,620.90 points, its lowest close since February 10.

Falls in the value of stocks trading without the attraction of their latest dividend, including major banks HSBC and Standard Chartered, also took their toll on the FTSE 100, knocking some 20 points off the index.

Although the British stock market has been propped up by a gradual recovery in the economy, some traders expected the FTSE to remain under pressure in the near-term, with the index down 1.9 percent since the start of 2014.

“The UK market remains vulnerable … Unlikely that we have seen the last of this and my preference would be to sell rallies,” Hampstead Capital hedge fund manager Lex van Dam said.

Barclays Capital analyst Lynnden Branigan saw scope for the benchmark, which has this week fallen below both its 50-day and 100-day moving averages, to drop down to its 200-day moving average, at 6,578, “within the next five days, for sure”.

“There is a risk of a squeeze below, towards perhaps 6,500,” he said.

The FTSE 100 rose 14.4 percent in 2013 to record its best annual gain since 2009. It also reached peaks that marked its highest level in around 13 years in early January this year. ($ 1 = 0.6014 British Pounds)

(Additional reporting by Sudip Kar-Gupta; Editing by Catherine Evans)