London Report: Low commodity prices drag on mining shares
BRITAIN’S top share index fell yesterday, with the mining sector hit by low commodity prices and a resurgence in industrial unrest.
However, the index remained above the key support level of 6,300, keeping it around five-year highs.
The mining sector was the main drag on the FTSE 100, losing 0.9 per cent after copper fell to a three-week low.
Volatile copper miner Kazakhmys was a top faller on the index, losing 2.8 per cent.
Miners specialising in gold fared lit- tle better, with the commodity having hit a six month low last session. Fresnillo lost 0.7 per cent.
“Base metal prices are not at the high levels we expected for the start of 2013, and that’s hit miners. We don’t see that much high demand from the Eurozone, US and Asia,” Myrto Sokou, senior research analyst at Sucden Financial Private Clients, said.
Anglo American saw losses and vol- ume pick up in afternoon trade after a clash at Anglo’s Amplats platinum mine in a labour dispute.
Anglo American shed 2.8 per cent, among the top FTSE fallers. On Friday, it had managed gains despite poor earnings, as investors had hoped it had put a torrid 2012 – in which produc- tion was marred by industrial dis- putes – behind it.
Miners had rallied since November on hopes of renewed demand from China as growth picked up after a period of political transition at the end of last year.
“Miners have done very well as a China play, and there’s an element of unwind to that. I’m pretty cautious on Chinese infrastructure plays, so I think there’s more weakness in the miners to come,” Robert Quinn, chief euro- pean equity strategist at Standard & Poor’s Capital IQ, said.
At the close, the FTSE 100 was down by 10.07 points, or 0.2 per cent lower, at 6,318.19 points, with the materials sector – which includes commodity- related stocks such as miners – taking 6.6 points off the index.
The session was a quiet one, with the US equity market closed for the Presidents’ Day holiday. Only half of the average 90-day volume was traded across the index as a whole.
Lawmakers in the United States are on holiday this week, leaving four days for members of Congress to negotiate a deal to avoid automatic budget cuts due to kick in at the beginning of March, which could crimp demand in the world’s biggest economy, and impact company earnings.
However, despite the session’s falls, the FTSE did not test support at the 6,300 level, indicating that there was still good underlying strength in the index. After the best January since 1989, the FTSE has traded sideways this month, dipping below 6,300 for over a week in early February.