Oil and Mining Stocks Drag FTSE 100 Lower
January 07 2016 - 07:10AM
Dow Jones News
LONDON—Oil and mining company stocks were hammered on Thursday,
dragging the entire U.K. FTSE 100 blue-chip index lower, as prices
for commodities such as crude oil and copper tumbled to fresh
multiyear lows on renewed fears about China's slowing economy.
The FTSE 100 index fell 2.7%, with natural-resource companies
accounting for seven out of the index's top 10 worst performers in
early morning trade.
Anglo American PLC, the world's fifth-largest diversified-mining
company by market capitalization was the biggest loser, dropping as
much as 10% while Anglo Australian miners BHP Billiton Ltd and Rio
Tinto PLC, the world's No. 1 and No. 2 miners by value, fell 5.8%
and 5.1% respectively, making them the third- and fifth-worst
index performers. Switzerland-based miner and trader Glencore PLC
was the sixth-worst performer, falling 5%.
Among oil companies, BG Group PLC was the eighth-worst
performer in the FTSE 100 index Thursday, dropping 4.6% while Royal
Dutch Shell PLC fell 4.2% and BP PLC dropped 4.3%. BG and Shell
have agreed to merge in a bid that will be voted on by shareholders
later this month.
Overall, the FTSE 350 oil-and-gas producers index was down 4.4%
while the FTSE 350 mining index was down 5%.
"It's a fairly ominous sign," said Macquarie Research mining
analyst Alon Olsha. "It's a reaction to the panic in the Chinese
markets."
The drop followed a rout in Asian equity markets after the
Chinese government decided to suspend stock-market trading for a
second time this week after its blue-chip index fell more than 7%.
Investors sold out of shares after the People's Bank of China made
its largest downward adjustment to the yuan since August.
"The interpretation is that the currency-market manipulation
tells you the economy is doing worse than expected," said Johan
Javeus, chief strategist at SEB Group. "Maybe growth is slowing
faster, and that's something we're concerned about outside China,"
he said.
Natural-resource companies have been particularly hard hit by
China's economic slowdown since the country is the world's largest
consumer of many metals, including copper and zinc which fell to
fresh near seven-year lows Thursday.
China is also the world's second-largest consumer of crude oil,
which fell in the U.S. to $32.09 a barrel, its lowest level in more
than 11 years.
Prices for both metals and oil have been slammed as supply far
outstrips demand. On any given day, for instance, world oil supply
is 1 million barrels higher than demand.
Riva Gold contributed to this article.
Write to Alex MacDonald at alex.macdonald@wsj.com
(END) Dow Jones Newswires
January 07, 2016 06:55 ET (11:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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