Mining shares and fears over growth hit FTSE

ON R

ON REPORT

BRITAIN’S top share index ended lower yesterday, with poor US data reigniting concerns about the pace of recovery in the world’s biggest economy and hurting growth-linked sectors such as mining and banking.

Miners extended losses in afternoon trading after the ADP National Employment Report showed lower than forecast private sector jobs were added in March, while the Institute for Supply Management’s services sector index came in below expectations.

The UK mining index fell 2.4 per cent, taking the yearly losses to 12 percent, against a nine per cent rise by the FTSE 100 index this year. ENRC, Xstrata and BHP Billiton fell by between two to 4.6 per cent.

“There is an element of disappointment in terms of the US data. Perhaps the weaker numbers that we saw today are just being used by investors as an opportunity to take profits after a very strong rally,” Henk Potts, equity strategist at Barclays Wealth, said.

The blue-chip FTSE 100 index finished 70.38 points, or 1.1 per cent, lower at 6,420.28 on concerns about the sustainability of US economic recovery and its impact on metals demand and banking activities.

The UK banking index fell 1.6 per cent, with Barclays down 2.8 and Standard Chartered down 1.4 per cent. Royal Bank of Scotland dropped 4.4 per cent as the launch of a £4bn compensation claim against the bank by investors further hurt sentiment.

After Wednesday’s disappointing ADP Private sector jobs data, investors’ focus has shifted to widely-watched US non-farm payrolls data, due today. Analysts forecast the payrolls hit 200,000 in March, with the unemployment rate seen holding steady at 7.7 per cent.

“I expect to see a lot more risk aversion in the lead up to Friday’s figures now, with a poor jobs report potentially marking the end of the record breaking bull rally. The only question now is, how big will the correction be?,” Craig Erlam market analyst at Alpari said.

A sharp decline in heavyweight Vodafone, after Verizon denied making a bid for the company, also put pressure on the FTSE 100 index.

Vodafone took the most points off the index after its joint venture partner Verizon Communications sought to end to rampant bid speculation by saying it did not plan to buy the British group.

Vodafone fell two per cent. However, analysts remained positive on the stock, which has jumped about 25 per cent since the start of the year on the potential sale of the $115bn stake.

“Intensification of recent market talk just serves to highlight, potentially even increase, the perceived value of the US wireless joint venture,” said Mike van Dulken, head of research at Accendo Markets.