Sector movers: Basic resource shares slide on dollar strength

Oil and basic resource stocks bore the brunt of selling on Thursday, as markets continued to react to the better-than-expected economic data trickling in from the States with the concomitant robustness in the US dollar which that entails.

US durable goods orders declined 18.2% in August following a 22.5% increase in July. However, the drop was led by the always volatile data series on orders for commercial aircraft.

As Capital Economics pointed out: "Stripping out the aircraft related volatility, the underlying strength in capital goods orders and shipments in August indicates that business investment in equipment continues to expand at a healthy pace in the third quarter".

Related to the above, Robin Brooks, Goldman Sachs's New York-based chief currency strategist, wrote to clients that: "The recent dollar strength has really been an unusual confluence of idiosyncratic trends. We expect the coming months to bring higher front-end rates in the US as Fed forward guidance fades, giving rise to real dollar strength. This is not an environment conducive to a pull-back [in the US dollar]."

It should be pointed out that Goldman sees euro/dollar at parity by 2017.

All of the above strength clashes with the weakness which is all too apparent in other economic blocks. Thus, on Wednesday Morgan Stanley called for more easing measures from Beijing than are currently planned.

The bank said current targeted easing measures "risk being too mild at a time when the property slowdown has strengthened growth headwinds".

Similarly, speaking in Lithuania ECB president Mario Draghi renewed the central bank's vow to go further on monetary policy using unconventional instruments to battle prolonged low inflation.

Thus, miners were among the main victims of the dollar's surge, with Anglo American leading the sector lower on a 54p fall to 1407p. Silver miner Fresnillo dimmed 27.5p to 748p, BHP Billiton dropped 51.5p to 1746p and Rio Tinto was 77.5p off at 3105p.

Oil industry stocks also took a hit with BP falling 13.15p to 451.8p, Petrofac leaking 23p to 1021p and Tullow Oil off 10.5p at 654.5p.