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FTSE 100 records worst session in a month on commodities rout

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By Reuters
London stocks drop as oil, mining stocks weigh
London stocks drop as oil, mining stocks weigh   -   Copyright  Thomson Reuters 2021

By Shashank Nayar

– London’s FTSE 100 ended sharply lower on Thursday as heavyweight mining and energy stocks tracked a slump in commodity prices on signs of slowing demand and economic growth amid fears of a quicker withdrawal of global monetary stimulus.

The blue-chip FTSE 100 index dropped 1.5% to hit a three-week low while recording its worst single-day drop in a month, with energy stocks and industrial metal miners leading the decline.

Anglo American, BP, Royal Dutch Shell and Rio Tinto were the top drags after oil prices dropped for a sixth straight session to a three-month low with growth bellwether copper and iron-ore prices also recording their multi-month lows on demand worries. [METL/] [O/R]

Expectation that the U.S. Federal Reserve will begin tapering its asset purchases later this year pushed the dollar to a nine-month peak, hitting non-dollar commodity-heavy markets. Also, fears around the global spread of the coronavirus Delta variant weighed on commodity demand.

“A theme that has developed across markets is that the spread of the Delta variant is a larger economic issue, compared to what investors were pricing in, which is weighing on economy-sensitive sectors like commodities,” said James Smith, developed markets economist at ING.

The FTSE 100 has gained 9.3% this year and recovered 26.5% from its October 2020 lows over optimism surrounding the British economy’s re-opening and dovish central bank policies.

However, a jump in global COVID-19 infections and fears that rising inflation would lead central banks to adopt a more hawkish tone have capped the index’s gains.

The domestically focused mid-cap index fell 1%.

Among stocks, British-listed shares of Chilean miner Antofagasta dropped 4.5% even after the company said its half-year profit would soar to $1.784 billion, and it would pay an interim dividend of 23.6 cents per share.

British cleaning products maker McBride ended 6.8% lower after it said it expected 2021 adjusted profit to be 55%-65% lower than market expectations.