Two-week low for the FTSE as metals and miners tumble

BRITAIN’S top share index hit a near two-week closing low yesterday as retreating metals prices and downbeat broker sentiment pressured mining stocks and with investors' moods darkened by weak US homes sales data.

The FTSE 100 index closed down 68.46 points, or 1.3 per cent, at 5,178.52, its lowest close since 11 June, having lost one per cent on Tuesday.

The index traded at 75.4 per cent of the 90-day average daily volume as millions of England fans cheered their team in its final qualifying match against Slovenia in the soccer World Cup.

At 1400 GMT, “we had England starting to play, so all eyes moved from trading screens onto TV screens, and at the same time we had a bad, bad number out of the US with the new home sales,” said Matthew Brown, sales trader at ETX Capital.

“Without the volume being there to support the FTSE, we’ve just seen the FTSE come off.”

Miners were the top blue-chip fallers, hurt by weak metals prices, and with moves by Morgan Stanley to cut target prices in the sector weighing on sentiment.

Lonmin stood out, down 3.2 per cent, while Xstrata shed 2.9 per cent, and BHP Billiton lost 1.9 per cent.

Some losses in the sector were pared in the afternoon, following the news that Australian prime minister Kevin Rudd, responsible for a proposed mining “supertax” in the country, may lose his job.

Integrated oils were down as a sector, with crude down by about 2 per cent. Royal Dutch Shell was down 2 per cent, and peer BP, which hit a fresh 13-year low on Tuesday, off 0.2 per cent amid fallout from the Gulf of Mexico spill.

Sales of new US single-family homes tumbled more than expected to a record low in May as the boost from a popular tax credit faded.

Banks were out of favour, with investors jittery about a slowing economic recovery. Barclays was the worst off, down 3.2 percent, while HSBC, Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered fell 0.5 to 1.5 per cent.

Plumbing supplies firm Wolseley was the top FTSE 100 faller, down 5.2 per cent, unsettled by the weak US new homes sales data.

Sales of US existing homes unexpectedly fell in May, sparking worries that the Federal Reserve may offer a less upbeat economic outlook after its two-day meeting.

British retail sales improved less than economists expected in June, but retailers were upbeat about prospects for July, thanks in part to the World Cup, a survey by the Confederation of British Industry suggested yesterday.

Meanwhile, the Bank of England's Monetary Policy Committee was split 7 to 1 on its decision to leave rates unchanged this month after one member called for a rate rise, minutes of the Bank's June 9-10 meeting showed yesterday.

This was the first call for a UK rate rise since August 2008, and came as a surprise to economists.