FTSE 100 share trading hits 10-year low

London Stock Exchange experiences smallest level of trading movement outside Christmas this century

The last three days’ purchases of shares in London’s blue chip index have dropped to the lowest level in more than a decade.

A mere 547m shares changed hands on Tuesday on the FTSE 100 compared with more than 2bn traded just under a year ago.

On Monday and last Friday the volume was even lower, 411m and 467m respectively, making it the smallest level of movement outside the Christmas period this century.

The end of the Olympics, the holiday period and the continuing eurozone crisis have been blamed for the low numbers, according to analysts.

August is typically a quiet month for trading, with many traders on holiday, though last year was busier than usual after the US lost its AAA credit rating in a downgrade by Standard & Poor’s.

Will Hedden at IG Group said inaction in Europe was playing its part and the slow market could not solely be blamed on the end of the Olympics.

“We are getting to a point when politicians will have to act, and a lot of people are just waiting to see what they’ll do. The news in Europe has been quite quiet, everyone’s having their holiday so we are not getting negative shocks.

“But people who would increase short exposure are not keen to do that because the idea that the politicians might act is worrying them.”

The New York Stock Exchange has also suffered some of its worst trading days, with volumes at their lowest non-holiday levels in more than 10 years.

Brenda Kelly, senior market strategist at CMC Markets, said: “When there are low volumes it does tend to make you a little dubious about the longevity of any upward trends and I think the real thing that could change that upward move is a decision made on the ESM [European stability mechanism].”

She added: “You will find people taking a couple of weeks off but if you look at what’s happening it seems a lot of short sellers have closed their short positions, waiting and seeing what would happen with the various European issues.”

The London Stock Exchange releases daily the number of trades made, along with the value of the shares sold. It was keen to stress that the value of the shares traded was not at a historical low level.

The value of shares sold on Tuesday stood at just over £3bn, which is in line with recent weeks but it is low compared with a year ago. On 12 August 2011 £5.8bn-worth of shares changed hands.

There are hopes that trading will increase next month and beyond as the politicians of Europe return from their holidays. Hedden said: “September is going to be a big month in Europe with the various summits, so trading levels could change depending on the outcomes. The US will also impact the markets, especially as the presidential elections approach.”

Last night the FTSE 100 closed up 33 points at 5865, a four-and-a-half month high.

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