ER oil and metals prices weighed on commodity stocks, while motor insurer and repair group AA slumped after posting lower earnings, driving shares into retreat yesterday.
The blue-chip FTSE 100 index was down 2.8 per cent at 5,935.84 points at its close, slightly outperforming European indexes.
AA, part of the FTSE 250 mid-cap index, fell 13 per cent after it reported a six per cent decline in first-half earnings.
The FTSE 100 raced to a record high of 7,122.74 points in late April but has since steadily lost ground, hit by concerns over an economic slowdown in China and the prospect of an interest rate rise soon in the United States.
Higher interest rates typically hurt stocks as they boost the appeal of bonds and cash by increasing returns on those assets. The China slowdown has hit oil and metals prices due to China’s role as a major global commodities consumer.
“On the back of slower global economic growth, commodity-related stocks are clearly under a lot of pressure,” said Dafydd Davies, partner at Charles Hanover Investments.
Oil and copper prices fell yesterday, with copper striking a two-week low, pushing down the shares of miners and energy stocks.
The UK mining index, down 5.5 per cent, hit a fresh six-year low. Commodities trader and miner Glencore fell 10.6 per cent, dipping below 100p for the first time and closing at 106.35, its lowest ever level.
Copper miner Antofagasta and miner Anglo American both fell after downgrades from broker Credit Suisse, down 7.3 per cent and 6.7 per cent respectively.
“Until China demand and emerging market currencies find a floor, it will remain challenging to put an absolute floor on commodity prices,” analysts at Credit Suisse said in a note.
In the mid-caps, copper company KAZ Minerals plunged 25.3 per cent, closing at an all-time low of 104.4.
“We’re getting to the point whereby a number of commodities stocks are looking very downbeaten,” said Manoj Ladwa, head of trading at TJM Partners, adding that investors were still wary of buying into the sector despite relatively low valuations.
The FTSE 100 is down by 9.6 per cent since the start of 2015.