FTSE driven down by Australian mining tax

Australia’s prime minister Julia Gillard has won enough support to form a government, but her political victory has had a knock-on effect on the UK's commodity-heavy FTSE 100 which dropped 1% to 5385 on Tuesday morning.

One of Gillard’s proposed policies is a 30% tax on mining profits. Her victory saw the FTSE 100’s heavyweight miners drop, with Rio Tinto down 2.15% to £34.34 and BHP Billiton down 1.3% at £18.95.

The hardest hit miner was Xstrata, down 2.66% at £10.60. However profit-taking was also likely to have played a part in the price falls after a strong week for commodities firms.

Companies in the financial sector have seen largest falls in share prices this morning with hedge fund manager Man Group the worst hit. It’s shares were down 4.59% at 225p. Barclays was the next hardest hit, down 3.4% to 312p.This morning the bank announced the appointment of Bob Diamond as its chief executive, replacing John Varley.

The top gainer was engineering firm Invensys. Its shares were up 4.15% to 261p, boosted by speculation of a possible bid from the Swiss industrial conglomerate ABB. The firm is a likely to fall out of the FTSE 100 when the index is reshuffled this week.