By Carla Mozee, MarketWatch
Index hits session lows after weak U.S. retail-sales data
LONDON (MarketWatch) -- U.K. stocks dropped sharply Wednesday,
with mining stocks hit hard as copper prices tumbled and the World
Bank downgraded its forecast for global growth.
The FTSE 100 fell 2.4% to 6,388.46, hurt even more than other
major European benchmarks because of its heavy weighting of
commodity-related shares. The index fell to session lows as losses
for U.S. stocks (SPX) (DJI) accelerated. That move came after U.S.
retail sales sank in December, with most stores posting
surprisingly weak results during the busiest month of the shopping
season.
"With the U.S. economy continuing to solely carry the torch in
the race to global recovery ... there are some concerns that the
U.S. economy is slowing down after this performance, as well as
some indicators we have received within the past week," said Jameel
Ahmad, market analyst at FXTM, in emailed comments. However, as
third-quarter gross domestic product was recently confirmed "at an
outstanding annualized 5%, it was always expected that we would see
some sort of slower economic momentum."
Mining stocks dropped in London trade as copper prices fell to
levels not seen since mid-2009 on concerns about a supply glut.
Copper is considered to some investors as a harbinger of the global
economy. Meanwhile, the World Bank on Tuesday said it now expects
the global economy to expand 3% in 2015, down from its earlier
forecast of 3.4%. Strengthening in the U.S. economy and the fall in
oil prices won't be enough to offset troubles in the eurozone and
emerging markets, the institution said.
In the mining group, shares of copper producers Antofagasta PLC
and Fresnillo PLC fell 4.8% and 1.9%, respectively. Glencore PLC
tumbled 11%, Anglo American PLC lost 9.3% and Rio Tinto PLC (RIO)
declined 4%.
BHP Billiton PLC (BHP) shares gave up 5.3%. S&P Capital IQ
on Wednesday downgraded its rating on BHP to hold from buy. "We
expect weaker commodity prices to increasingly impact on group
profits as hedges expire and see currency headwinds from a stronger
[U.S. dollar]," Clive Roberts, S&P Capital IQ equity research
analyst, said in a Wednesday note.
BHP's next update is due on Jan. 21, with the release of its
December 2014 operational review.
For copper, both "the negative momentum and the technical
situation suggest that the price slide could continue for the time
being," said commodities analysts at Commerzbank in their daily
report. But when "prices bottom out, the countermovement could
therefore be pronounced."
Some stocks that had been higher lost ground during the
afternoon. AstraZeneca PLC (AZN) shares flipped 0.8% lower. The
shares had been up after the drug maker said a study of its
blood-thinning Brilinta tablets showed they reduced the risk of
heart attack in patients who have had previous attacks.
Luxury-goods maker Burberry Group PLC posted
better-than-expected same-store sales growth for the third quarter.
Shares turned lower by 1.3%.
But Tesco PLC shares rose 0.9% after a ratings upgrade to
outperform from neutral at Exane BNP Paribas. After being
"mismanaged," Britain's largest supermarket chain operator "now has
a very credible new CEO who is rapidly driving changes, motivating
staff and improving sales," analyst John Kershaw wrote.
Tesco shares held to higher ground after S&P during
afternoon trade downgraded the company to junk status, bringing its
rating to BB+ from BBB-. The turnaround measures Tesco recently
outlined "do not go far enough to support an investment-grade
rating," said S&P in a statement.
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