Footsie falls as mining sector feels pressure from weaker metal prices

FTSE: 5,765.80 (–90.54) Mid-250:11,786.02 (–125.60) Small Cap:3,273.13 (–12.92)

UK STOCKS dropped yesterday to a 2½-month low, led by a sell-off in mining companies as concern that the global economy is slowing hurt metal prices.

The benchmark FTSE 100 Index sank 90.54, or 1.6 per cent, to 5,765.8 at the close in London. The gauge has fallen for three consecutive weeks as US economic data trailed forecasts, adding to speculation the economic recovery is faltering.

“Sentiment is not great at the moment,” said Kishan Mandalia, a sales trader at City Index in London.

“The dollar is gaining ground which is pushing commodity prices lower and is weighing massively on the miners. In the short term we could see a bounce from here as a lot of the heavy selling has been done,” he said.

A report yesterday showed UK manufacturing fell more than economists forecast in April, dropping 1.5 per cent from the previous month. That was the most since January 2009.

ENRC, which earlier in the week voted against rehiring independent directors Richard Sykes and Kenneth Olisa, retreated 7.5 per cent to 742p. The Financial Times reported that Mehmet Dalman, also an independent director, is resigning his seat on the board over concerns about corporate governance at the company. The newspaper cited two people close to the situation.

Lonmin declined 5.4 per cent to 1,460p after the company said it has reduced its sales guidance for the 12 months to September to about 720,000 ounces of platinum.

Anglo American lost 3.3 per cent to 2,891p as copper fell for a third day in New York and gold tumbled the most in four weeks.

Vedanta Resources slid 3.3per cent to 1,977p and Xstrata fell 2.3 per cent to 1,333p.

AstraZeneca fell 2.1 per cent to 3,108p after Barclays lowered its recommendation for the drugmaker to “underweight” from “overweight”, citing concerns about Crestor, the company’s best-selling medicine last year.

Home Retail retreated 5.2 per cent to 165.5p, extending its sell-off this week to 22 per cent.

Hays rallied 2.9 per cent to 109.2p.

Bellway jumped 2.7 per cent to 716p after the second-worst performing UK homebuilder in the past 12 months said sales and visitor levels rose as demand increased in and around London. – (Bloomberg)