London close: Miners pull equities lower as commodity prices fall

UK equities finished on the back foot on Wednesday as mining shares slumped on weak sentiment and falling commodity prices.

“Commodity prices suffered at the hands of a resurgent dollar today, with Fresnillo and Randgold Resources feeling the effects of a circa 1% drop in gold prices, while a similar fate for copper prices sent Anglo American and Antofagasta southward,” said IG market analyst Joshua Mahony.

Glencore’s shares were under pressure even as it narrowed its adjusted first half net loss to $369m from $676m the previous year but disappointed analysts on news of a $395m charge on a coal hedging operation.

Analysts were also dissatisfied that the company hadn’t raised its target for full year earnings of $2.4-$2.7bn for its commodity trading business.

News that Glencore will delay resuming production at its Katanga Mining unit to early 2018 due to stubbornly low copper prices was another drag on the group’s shares.

Shares in Old Mutual, which is listed on the Johannesburg Stock Exchange, also declined as the South African rand tumbled amid speculation the country’s finance minister could be arrested imminently.

Hikma Pharmaceuticals was under the cosh after the drug maker reported a fall in first half operating profit due to a lower contribution from specific market opportunities for the generics business compared with the first half of 2015.

On the upside, advertising giant WPP gained after it reported better-than-expected headline pre-tax profit and organic sales growth for the first half.

Lloyds was higher as it emerged that boss Antonio Horta Osorio has sent a memo to his staff to apologise for ‘adverse publicity’ following reports of an affair.

Housebuilders were on the front foot again, with sentiment towards the sector still boosted by Persimmon’s results on Tuesday.

Economic data

London mortgage borrowing fell 23% quarter-on-quarter over the three months to June and by 3% year-on-year to £5.5bn, according to the Council of Mortgage Lenders, as a rise in first-time buying was not enough to offset a big decline from those moving house.

Numbers of mortgages fell 17% to 17,500 quarter-on-quarter and 8% compared to the second quarter of 2015.

Elsewhere, Germany’s gross domestic product rose at a quarterly rate of 0.4%, according to the Federal Statistical Office, Destatis, in line with the flash estimate but down on the first quarter’s 0.7% growth.

German exports increased 1.2%, but imports dropped 0.1%, signalling slack domestic investment. Economists had expected a 0.7% increase in exports and a 0.3% fall in imports.

In the US, the National Association of Realtors said sales of existing US homes fell more than expected in July. Sales were down 3.2% to a seasonally-adjusted annual rate of 5.39m, missing expectations for a much smaller drop of 0.4%.

Compared to a year ago, sales were down 1.6%. The median price for an existing home was up 5.3% from July last year to $244,100.

Separately, the US Federal Housing Finance Agency's house price index rose 0.2% in June after a 0.2% gain in May, which was slightly weaker than the 0.3% expected.

Oil prices fall on inventories report

Oil prices tanked after official data showed an unexpected increase in US weekly crude inventories. The Energy Information Administration said crude inventories rose 2.5m barrels to 523.6m barrels in the week to 19 August. It compared to expectations for a 500,000 drop in barrels.

Brent crude plunged 1.6% to $49.14 per barrel and West Texas Intermediate slumped 2.5% to $46.91 per barrel at 1600 BST, following the release of the data.

Oil prices were already falling prior to the EIA data after a report from the American Petroleum Institute showed crude stockpiles rose by 4.46m barrels last week against an expected drawdown of 850,000.

Looking ahead, the market is highly anticipating the Federal Reserve’s annual conference in Jackson Hole on Friday with chair Janet Yellen’s speech to be closely eyed for any remarks on interest rates.

Market Movers

FTSE 100 (UKX) 6,835.78 -0.48%
FTSE 250 (MCX) 18,014.65 0.18%
techMARK (TASX) 3,500.43 -0.28%

FTSE 100 - Risers

Travis Perkins (TPK) 1,695.00p 4.05%
Barratt Developments (BDEV) 500.50p 2.94%
Lloyds Banking Group (LLOY) 59.27p 2.92%
Berkeley Group Holdings (The) (BKG) 2,717.00p 2.57%
ITV (ITV) 201.40p 2.49%
Persimmon (PSN) 1,911.00p 2.19%
International Consolidated Airlines Group SA (CDI) (IAG) 401.70p 2.14%
Taylor Wimpey (TW.) 168.60p 2.12%
WPP (WPP) 1,781.00p 1.95%
Kingfisher (KGF) 372.90p 1.91%

FTSE 100 - Fallers

Randgold Resources Ltd. (RRS) 7,615.00p -5.05%
Fresnillo (FRES) 1,762.00p -4.03%
Old Mutual (OML) 196.40p -3.96%
Mediclinic International (MDC) 1,026.00p -3.93%
Antofagasta (ANTO) 532.00p -3.88%
Anglo American (AAL) 846.80p -3.34%
Hikma Pharmaceuticals (HIK) 2,230.00p -3.17%
Glencore (GLEN) 184.00p -3.06%
Rio Tinto (RIO) 2,386.00p -2.61%
BHP Billiton (BLT) 1,052.00p -2.46%

FTSE 250 - Risers

OneSavings Bank (OSB) 274.10p 15.51%
Marshalls (MSLH) 314.90p 9.76%
Shawbrook Group (SHAW) 204.10p 7.70%
Countrywide (CWD) 271.40p 5.44%
Brown (N.) Group (BWNG) 211.90p 5.32%
Grafton Group Units (GFTU) 598.00p 5.28%
Aldermore Group (ALD) 147.00p 4.78%
McCarthy & Stone (MCS) 200.00p 4.66%
Card Factory (CARD) 288.10p 4.65%
Virgin Money Holdings (UK) (VM.) 306.10p 3.76%

FTSE 250 - Fallers

Acacia Mining (ACA) 542.50p -5.41%
Investec (INVP) 465.90p -5.38%
Hochschild Mining (HOC) 283.80p -4.22%
Centamin (DI) (CEY) 162.20p -4.14%
Kaz Minerals (KAZ) 185.00p -3.14%
Amec Foster Wheeler (AMFW) 540.50p -2.52%
Just Eat (JE.) 569.00p -2.49%
JPMorgan Emerging Markets Inv Trust (JMG) 695.50p -1.77%
Polymetal International (POLY) 1,139.00p -1.56%
Inmarsat (ISAT) 810.50p -1.52%