By Helen Reid
LONDON (Reuters) – Anxiety over emerging market assets sent Britain’s FTSE 100 tumbling on Friday as a currency crisis in Turkey deepened and Russia’s rouble extended losses, dragging exposed stocks down.
The FTSE 100 <.FTSE> fell 0.7 percent by 0830 GMT but was still on track to end the week in the black with a 0.5 percent rise, its best performance in a month. It outperformed Europe’s STOXX 600 and Germany’s DAX, which was down 1.6 percent.
Many UK-listed companies derive a significant chunk of revenues from emerging markets, and several Russian companies are listed on the British stock market.
Russian gold miner Evraz <EVRE.L> was the worst-performing FTSE 100 stock, down 6.6 percent after broker VTB Capital downgraded it and the rouble fell to its lowest since July 2016 on anxiety over a fresh round of U.S. sanctions.
Russia-exposed miners Polymetal <POLYP.L> and Kaz Minerals <KAZ.L> fell 2.2 and 1.7 percent.
A slide in the Turkish lira to record lows, after President Tayyip Erdogan dismissed investors’ concerns, sent tremors across other emerging markets, with South Africa’s rand falling to a six-week low.
This weighed on South Africa-exposed bank Investec <INVP.L>, whose shares fell 2.4 percent. Emerging markets-focused lender Standard Chartered <STAN.L> fell 1 percent.
UK mid-caps with exposure to Turkey and nearby emerging markets were also bruised.
Travel operator On The Beach <OTB.L> fell 3.2 percent, while TBC Bank <TBCG.L>, a Georgian lender, declined 3.5 percent.
“Whilst generally EM economies are much stronger than they were 20 or 30 years ago you’ve still got some countries that are a bit of a mess,” said Peter Elston, chief investment officer at Seneca Investment Managers.
“That’s occasionally going to cause problems for the asset class as a whole, as it is doing at the moment.”
The FTSE 100 fell despite a slide in sterling, which usually supports the exporter-heavy index. The negative relationship between the two has evaporated recently. https://reut.rs/2OkPhOi
Miners were the biggest weight on the FTSE 100, with Fresnillo <FRES.L>, Randgold Resources <RRS.L>, Anglo American <AAL.L>, Antofagasta <ANTO.L>, Glencore <GLEN.L>, and Rio Tinto <RIO.L> all down between 1.6 and 3.2 percent as copper prices fell on a stronger dollar.
Outside of EM-driven moves, shares in engine maker Rolls-Royce <RR.L> fell 3.1 percent after JP Morgan downgraded the stock to “underweight”.
“Relative to other civil aerospace stocks we follow, we think Rolls-Royce now offers investors a less attractive risk-reward,” JPM analysts wrote, arguing the firm is showing deteriorating earnings quality.
The FTSE 250 <.FTMC> fell less sharply, down 0.4 percent thanks to its less internationally exposed constituents.
“Mid-caps fell horribly following the (Brexit) vote, and they’ve since made back everything they’ve lost and more, which suggests they have been able to thrive in this post-ref vote environment,” said Seneca’s Elston.
However, he added, “earnings have been very mixed.”
Analysts have been cautious on mid-cap earnings, while the index has been declining since a record high hit on June 14.
(Reporting by Helen Reid)