Sector movers: Commodities decline pummels natural resources stocks

Sharp declines in the commodities market took its toll on natural resources stocks on a flat day of trading in London on Monday.

The blue chip FTSE 100 barely budged from Friday’s close up a mere 0.20% or 13.61 points at 6788.69. The FTSE 250 replicated flat trading ending just 0.14% or 25.51 points higher at 17781.42 with mining, oil and gas and oilfield services stocks bearing the brunt of intraday bearish sentiments in the commodities market.

The commodities dip was led by gold, which shed $45.55 to $1,088.05 an ounce, its weakest level since March 2010. Industrial metals also faltered with major contracts on the London Metal Exchange firmly in the red.

Past the midway point in the session, three-month delivery contracts of primary aluminium (down 1.2%), copper (down 0.8%), lead (down 1.6%), nickel (flat), tin (down 1.4%) and zinc (down 1.4%) were trading lower. Oil also traded lower with Brent well below the $60-level deemed as a breakeven point by many exploration and production companies.

Invariably, mining and oilfield services companies (down 3.41%), mining (down 0.87%) and metals (down 0.43%) bore the brunt. Randgold Resources (down 4.67%) and Fresnillo (down 4.41%) were the biggest blue chip fallers.

Meanwhile, Acacia Mining (down 13.72%), Centamin (down 9.08%), Petrofac (down 5.90%) and Tullow Oil (down 5.15%) made up for bulk of the FTSE 250 fallers. Other notable names in the said sectors to take a hit included Lonmin (down 4.37%) and Premier Oil (down 3.92%).

Going the other way electrical, software and computer services stocks were firmly in the green with Aveva (up 28.67%) leading the headline sector index up by 3.42%. Analysts said Aveva’s merger with Schneider was “transformational” as shares in the software firm closed up 484p at 2,256p.

Investec lifted its recommendation from ‘hold’ to ‘buy’ and its price target for the FTSE 250 stock from 1450p to 2600p. Furthermore, the deal comes at opportune time and has many merits, it added, as Aveva was suffering from its high exposure to oil and gas.

Numis estimated the net effect of the deal would be £10 per share in cash. It had no rating on the stock as it is acting as sponsor and broker.

“In a single deal this brings Aveva capabilities in all the areas it has previously identified as strategically attractive – simulation software, a strong US presence, a much greater footprint with owner operators -covering we believe over 70% of plants globally- and market leading products in a wide range of industrial software,” the analysts said.