Miners help extend FTSE 100 losses as Greek talks fail
BRITAIN’S top shares extended losses yesterday, led by the mining sector as the cloud looming over the Eurozone darkened after Greek politicians failed to form a government, denting sentiment and the outlook for global growth.
London’s blue chip index fell 0.5 per cent to 5,437.62, adding to the previous session’s two per cent drop, with anxiety increasing that Greece might leave the Eurozone.
Reflecting concerns that the Eurozone crisis will deepen the recession in Europe and do serious damage to the outlook for corporate earnings, the FTSE volatility index – a crude gauge of investor fear – has spiked more than 100 per cent since Spain said it would need to scale back its austerity plan in mid-March.
A slump in German analyst and investor sentiment in May and mixed data in the US, where April retail sales hinted at slower spending pace while a gauge of manufacturing in New York state bounced higher in May, did little to boost sentiment.
Miners, which rely heavily on demand from the US and China, which is the most voracious consumer of raw materials and has seen its growth slow this year, were the sharpest fallers.
Growth worries led UBS to cut its earnings forecasts for Kazakhmys, down 4.1 per cent, by up to 20 per cent between 2012-14 and repeat its “sell” rating on the miner.
The mining sector is down 20 per cent in 2012, hit by concerns over rising costs and slowing demand, and is in oversold territory for the first time since August 2011 just before UK stocks began to rally.
The broader FTSE 100 has fallen nine per cent since mid-March, while banks and insurers, which are most exposed to the changing fortunes of the Eurozone, have shed up to 10 per cent in the last three months.
Both sectors were lower again yesterday with insurer Aviva falling 2.9 per cent, weighed by an earnings downgrade by BofA Merrill Lynch, which said it was too early to turn positive on the stock.