FTSE ends lower as commodities plunge again - London Report

AIN

AIN’S blue-chip share index fell yesterday, with basic resources and energy companies coming under fresh selling pressure due to lingering concerns about demand for metals and a poor outlook for commodity prices.

The FTSE 100 index ended 1.2 per cent lower at 5,962.26 points. The index has fallen more than eight per cent so far this year.

Goldman Sachs cut its target prices for BHP Billiton and Glencore and reiterated its “sell” rating on Rio Tinto and Anglo American.

The UK mining index and the oil and gas index slid 3.1 per cent and two per cent respectively, dragged down by a 2.2 to 9.6 per cent drop in shares of Glencore, Anglo American and BHP Billiton.

Glencore shares hit a new record low. It has slumped nearly 65 per cent in the past three months alone due to a sharp decline in commodity prices amid concerns for economic growth in China, the world’s biggest metals consumer.

“Markets continue to run hot and cold and any recent rallies have proved to be fairly unsustainable,” Brenda Kelly, head analyst at London Capital Group, said.

“Today, we witness a U-turn in FTSE movers, with the basic resource sector once again falling out of favour with market participants… UK miners and energy companies are taking the brunt of the pain.”

UK engineering conglomerate Smiths Group dropped 6.2 per cent after several brokers cut its target price, citing lacklustre prospects for the company’s John Crane energy services division due to recent market turmoil.

“The outlook for John Crane is weak, as oil and gas end markets take their toll,” analysts at Nomura wrote in a note.

On the positive side, Lloyds rose 1.2 percent after the Telegraph reported that Alex Wright, a fund manager at Fidelity, expected Lloyds to become a dividend giant within two years.

Retailer Next was up about 0.5 per cent after a price upgrade from broker Nomura, which cited the company’s multiple opportunities to grow both domestically and oversees online to attract new customers.

In the mid-caps, travel company Thomas Cook rose 2.7 per cent after maintaining its guidance for growth this year and saying that late summer trading had seen strong demand for holidays to Greece and Egypt.