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FTSE slumps: investors dump shares, run to gold
Global stock market sell-off gathers pace amid continuing commodities rout, while gold jumps in flight to safety.
Update: The sell-off in global stock markets has gathered pace, as oil remained below the $30 mark and a wider rout in commodities accelerated.
The FTSE 100 fell 133 points, or 2.3%, to 5,785, mirroring heavy losses across global markets. US markets lurched lower at the open, with the Dow Jones down 2.4% and the S&P 500 falling 1.9%, while losses on eurozone markets were even more severe.
France's CAC 40 fell 2.9%, Germany's DAX 30 dropped 2.4%, Italy's FTSE MIB lost 2.3% and Spain's Ibex was trading 2% lower.
Amid mounting fears over faltering growth, investors fled to the safe haven of gold, sending the precious metal to $1,093 an ounce, up from $1,083 on the day.
On the FTSE 100, the sell-off engulfed nearly every stock on the index, with only a handful making gains, including gold miner Randgold Resources (RRS), up 2.8% at £43.42.
Mining stocks extended their losses as metal prices were hit by the commodities crunch and BHP Billiton (BLT) was forced into a $7.2 billion (£5 million) writedown of its US shale assets, sending its shares 6.8% lower to 611.9p. Anglo American (AAL) tumbled 11% to 233.8p, and Antofagasta (ANTO) was down 5.8% at 351.4p.
Fresh oil slump drags down FTSE
(10:33) A fresh plunge in the oil price has weighed on the FTSE 100, while miners tumbled after copper fell to fresh lows and BHP Billion suffered a writedown.
Oil fell below $30 a barrel, down 3.1% on the day, giving up yesterday's gains and trading at near 12-year lows. Brent crude has now fallen 20% since the start of the year.
That weighed on the FTSE 100, which dropped 54 points, or 0.9%, to 5,865. 'Equity markets already continuing to retrace towards recent lows after what was nothing more than a teasing bull-trap rally exacerbated by short squeezes,' said Mike van Dulken, head of research at Accendo Markets.
'And it's the same old drivers pulling sentiment south; oil back below $30 a barrel and China jitters still to the fore.'
Analysts at Commerzbank cut their oil price forecasts but argued for some recovery over the course of 2016, predicting a $50 price by the end of the year, down from their previous $63 estimate.
'The recent price slide had been triggered by market turmoil in China, with concern over weaker demand in the second-largest oil consuming country increasing as a result,' said Carsten Fritsch, adding that tensions between Saudi Arabia and Iran had 'increased the risk of a price war'.
'Most of these arguments are not really new, nor can they be confirmed by available data,' he added. 'For instance, Iran's upcoming return to the market has been known for the last six months and Chinese oil imports recently even marked record highs. We therefore believe the latest drop in prices is overdone.'
But miners were the biggest fallers on the index, as copper fell to fresh six-and-a-half year lows and BHP Billiton (BLT) was forced to write down the value of its US shale assets by $7.2 billion (£5 billion), heightening fears a dividend cut is on the cards. Shares in the miner fell 5.8% to 619.2p.
That hit the rest of the mining sector, which gave up the bulk of gains made in yesterday's brief relief rally. Anglo American (AAL) fell 8.6% to 240.4p, Glencore (GLEN) dropped 6.9% to 73.2p, Antofagasta (ANTO) shed 5% to 354.4p and Rio Tinto (RIO) traded 4.4% lower at £16.58.
They were joined at the bottom of the index by Moneysupermarket (MONY), down 6.6% at 327.5p after reporting a bigger-than-expected contraction in its insurance division in the fourth quarter.
Among 'small cap' stocks, the mining rout hit the BlackRock World Mining (BRWM ) investment trust, down 4.6% at 164.1p after it warned of another difficult year ahead because of over production from the sector. Shareholders in the trust lost 37% last year.
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- Royal Dutch Shell PLC (RDSb.L)
- BP PLC (BP.L)
- BG Group PLC (BG.L)
- BHP Billiton PLC (BLT.L)
- Anglo American PLC (AAL.L)
- Antofagasta PLC (ANTO.L)
- Glencore PLC (GLEN.L)
- Rio Tinto PLC (RIO.L)
- Vedanta Resources PLC (VED.L)
- Tullow Oil PLC (TLW.L)
- EVRAZ plc (EVRE.L)
- Moneysupermarket.Com Group PLC (MONY.L)
- Randgold Resources Ltd (RRS.L)
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by Daniel Grote on Jul 29, 2016 at 09:41