THE FTSE 100 ended 2.6 per cent, or 111.88 points, lower at 4,234.05 yesterday as falling commodity prices pressured miners and oil majors.
Bucking the trend, Anglo American was the biggest blue chip gainer, rising 4.6 per cent, after rival Xstrata said it wanted talks about a proposed merger of equals.
Xstrata shed 6.7 per cent and Lonmin fell 8.1 per cent on speculation that Xstrata could sell its 24.9 per cent stake in the platinum producer as a result of the proposed merger.
Oil and gas firms took the most points off the index, after oil prices fell towards $67 a barrel on the back of a strengthening US dollar. Royal Dutch Shell, BP and BG Group lost between 3.5 and 6.1 per cent.
“A negative move from oil is proving negative for equities as well and they are very highly correlated at this moment in time,” said Angus Campbell, head of sales at Capital Spreads.
Softer commodity prices pressured other miners, with BHP Billiton, Eurasian Natural Resources, Rio Tinto and Kazakhmys shedding between 4 and 7.5 per cent. Fresnillo fell 7.5 per cent. The world’s largest primary silver producer dropped a hostile takeover offer for MAG Silver.
Banks were broadly weaker. Barclays, HSBC, Standard Chartered, Royal Bank of Scotland and Lloyds Banking Group fell between 1.8 and 4 per cent.
Among other FTSE 100 fallers, British Airways shed 8.6 per cent after talk that the airline has clashed with its pension fund trustees over a higher-risk investment strategy.
Medical equipment manufacturer Smiths Group was one of the few stocks in positive territory, rising 3.5 per cent, after Deutsche Bank upgraded its rating for the firm to “buy” from “hold” and increased its target price.
The large cap index had a slightly different make-up on yesterday as the latest quarterly reshuffle took effect, with London Stock Exchange, 3i Group and Wolseley making a return to blue-chip status after one quarter in the mid caps. LSE was down 4.1 per cent, 3i shed 4.3 per cent and Wolseley lost 3.7 per cent.