FTSE 100 falls as mining firms lose ground

The FTSE 100, which had been outperforming its European counterparts for much of the day, dropped further in the afternoon to end 1.8% lower at 6,408.

‘Markets are looking east and don’t like what they are seeing, ‘ says Laith Khalaf, senior analyst at Hargreaves Lansdown.

Battered by the crashing oil price, engineer Wood Group upped its interim dividend by 10.1% after slashing costs more than expected as its oilfield workforce was cut by a fifth in the face of tumbling sales and profits.

Mining shares have fallen over 60 percent since the end of 2010 as global demand for commodities has slowed, culminating in a move by China’s central bank to weaken its currency.

Of course, the poor performance has been a boon for inverse ETFs, such as the Boost FTSE 100 3x Short Daily ETP (3UKS) which is up more than 26% since the April high.

The price of a barrel of Brent crude has slumped 4.6% in the space of 24 hours to $46.51, as it returned to the subdued levels last seen in January, as US data showed a jump in oil stocks. Freight rates for container shipping from Asia to Europe fell by over 20 per cent in the second week of August, even though trade volumes should be picking up at this time of the year.

Miners catch a break: Battered mining shares found some relief Thursday, to make the basic materials group the best-performing on the index. Tuesday’s decline marked the index’s longest losing streak since mid-December. Year-to-date, Fresnillo shares are down roughly 10.6% and Randgold’s stock has lost 2.9%.

This plunge came after mining giant Glencore reported a £431 million first-half loss and lowered its trading earnings forecasts.

But inflation remains extremely low – it was just 0.1% in July and 0% in June – and growth will suffer if there’s a global slowdown.

“A Fed rate hike for either September or December is largely priced in now, so the dollar may struggle to gain further ground going forward, especially against some of the stronger currencies like the pound”, said Fawad Razaqzada, analyst at Forex.com. Sterling fetched $1.5677 late Wednesday in New York.

The FTSE 100 falls came despite a bounce-back among miners, with Randgold Resources up almost six per cent, or 233p, to 4255p, while Mexico’s Fresnillo rose 36.5p to 684.5p and Anglo American added 31.1p to 740.5p.