THE FTSE 100 fell yesterday, extending losses in afternoon trade as concerns that the Cypriot parliament will reject a bailout package hit banks and weighed on sentiment.
Banks closed 0.9 per cent lower, shaving 10 points off the index after a subdued morning’s trade, with the Cypriot President telling reporters that he expected the parliament to reject a bill that it saw as unjust.
“I was amazed how sanguine the markets were this morning, but now with reports that no-one will vote for it, it’s a mess,” one trader said.
“Without the vote there’s no bailout at all, and it's the banks which are bearing the brunt of that.”
Miners also extended their morning weakness as investors shunned cyclical stocks, which rise with optimism over the economy.
Four of the top five fallers were miners. The sector dropped 3.4 per cent following broker downgrades and top executives of blue-chip firms warning of softer prices as growth in China's steel production slows.
Weak demand from China combined with fears of contagion from Cyprus to send copper prices to a four month low.
“Copper fell to new lows today, which is hitting the miners, and there are real concerns about the price moving forward which will continue to weigh,” Myrto Sokou, analyst at Sucden Private Financial Clients, said.
“The problems in the Eurozone are apparent, but the bigger surprise is this weakening in demand from China.”
Global miner Rio Tinto was the top FTSE faller, dropping 5.2 per cent.
Rio and BHP Billiton, which fell 3.5 per cent, suffered as Goldman Sachs reduced its iron ore price forecasts and cut its recommendations on the firms to “sell” and “neutral”.
Mexican miner Fresnillo was also among the top losers, falling 3.4 per cent after Deutsche Bank cut the stock to “sell” from “hold”.
The blue-chip FTSE 100 closed 0.3 per cent lower, down 16.60 points, to 6,441.32 points, 1.4 per cent lower than the five year highs hit last week.
Although the FTSE 100 has enjoyed a strong start to the year, rising 9.2 per cent, a stellar performance by UK top shares this quarter is expected to wane over 2013, a poll showed.
The FTSE 100 is seen at 6,582 by mid-2013, barely scaling last week’s five-year highs, before adding 4.5 per cent by the end of the year to rise to 6,750.