Resources pull FTSE to lowest since February

BRITAIN’S top share index slipped to a 10-week closing low yesterday, pulled down by resource stocks on mounting concerns that global growth could weaken, hurting demand for commodities.

The FTSE mining index fell 3.1 per cent, the biggest sectoral decliner, followed by the oil and gas index , down 1.8 per cent as investors dumped the sectors after recent economic data from China and the United States.

Already fragile sentiment got a further beating after the International Monetary Fund late on Tuesday trimmed projections for global economic growth for this year and next, while data showed yesterday that European car sales fell 10.3 percent in March.

Charts pointed to further declines for the blue chip FTSE 100 index, which fell 60.37 points, or one per cent, to 6,244.21, the lowest close since early February. It has fallen nearly three per cent in the past five sessions, but is still up about six per cent so far this year.

“There are increasing concerns about the direction of economic growth and some disappointment is coming from corporate earnings,” said Paul Kavanagh, director of research at Killik.

“Risks are more weighted towards the downside in corporate earnings. The near-term sentiment has changed to selling rallies rather than buying dips and that can continue for a couple of weeks.”

Britain’s biggest retailer Tesco reported an underlying pretax profit of £3.55bn for the 2012-13 year, broadly in line with analysts’ expectations but down 14.5 per cent on 2011-12.

Tesco shares fell 3.9 per cent, also pressured by its move to write down the value of its global operations and plans to exit the US market.

“This points to an underlying problem that the UK retailers have faced – namely an inability to diversify earnings to the degree which will provide resilience during prolonged economic headwinds,” Torben Kaaber, chief executive at Saxo Capital Markets, said in a note.

Luxury brand Burberry bucked the trend, rising 1.8 per cent after posting better-than-expected revenue, thanks to strong demand for its more expensive products in China.

Despite a broad market sell-off, some defensive sectors remained positive. The beverages index rose 0.4 per cent, while the personal goods sector was up 1.2 per cent as some investors moved from cyclical stocks.

An exploration update hurt Tullow Oil, down nine per cent, Northern Petroleum, down 18 per cent, and Wessex Exploration, down by a whopping 45 per cent.