Sector movers: Metals and mining mauled by steel bears

Industrial metals and mining was the worst performing sector in London on Tuesday, as angst about China's slowdown swung back into focus.

Led by mining giants Anglo American, Antofagasta, BHP Billiton and Rio Tinto, the sector crumbled by a weighty 10.25% by late afternoon.

Traders and investors fear a longer-lasting slump in copper and iron ore prices as a result of deceleration in China’s domestic steel use and increasing production from Australia.

Ratings agency Moodys took a dim view of the sector, offering a dreary outlook for base metals with a weak outlook and a negative outlook for the sector as a whole on the basis of slowing growth in both China and Brazil, muted conditions in Europe and weak recovery in the US.

Furthermore, after a second recent trip to China, analysts at Exane BNP Paribas said "the outlook for steel and steelmaking raw materials looks even more dreadful as there is no evidence of production cuts commensurate with the excess capacity".

Adding a technical analysis on the red metal, Brenda Kelly at London Capital Group said: "Copper prices are higher for the second day in a row but remain trapped below trend line resistance form the May highs. Unless price action can make a concerted effort to move through $2.44/lb the downtrend and downside will likely persist and this will be at the expense of gains in basic resource stocks."

Oil equipment engineers and service companies were also hit by fallout from continuing falling production at major oil companies, with BP's results beating forecasts but profits still declining 40% and chief executive Bob Dudley warning of considerable cost cutting to come, which will hit companies that support oil producers hard.

Top performing sectors so far today

Pharmaceuticals & Biotechnology 12,410.26 +1.40%
Fixed Line Telecommunications 5,164.51 +0.74%
Food Producers & Processors 8,824.06 +0.67%
Banks 3,955.72 +0.01%
Alternative Energy 0.00 0.00%

Bottom performing sectors so far today

Industrial Metals & Mining 780.51 -10.25%
Oil Equipment, Services & Distribution 15,482.99 -4.15%
Mining 9,595.33 -2.41%
Electricity 8,961.99 -2.13%
Aerospace and Defence 4,188.46 -2.02%