Sector movers: Natural resource stocks tumble on stronger dollar

Decline in mining, metals and oil stocks on Friday meant the London market ended the week on a flat footing, as a stronger dollar sent the entire commodities market tumbling.

The FTSE 100 closed 0.17% or 11.07 points lower at 6,353.83, while the FTSE 250 was up 0.29% or 48.79 points at 17,165.92, with a decline in natural resource stocks being offset by gains elsewhere on sentiments of a healthier US economy being the theme of the session.

The precious metals market registered huge declines as a positive US jobs report, seen to be increasing the likelihood of an interest rate hike, sent the dollar soaring to record intraday highs against a basket of global currencies.

COMEX gold futures fell 1.53% to $1,087.30 an ounce, while spot gold was 1.49% or $16.50 lower at $1,087.42 an ounce, extending overnight declines. COMEX silver fell 1.69% or 25 cents to $14.73 an ounce, while spot platinum was 0.88% or $8.34 lower at $942.16 an ounce.

Base metals also felt the heat from a stronger dollar, with greenback priced raw material imports turning dearer for emerging markets considered their primary importers. Akin to gold in the precious metals complex, copper carried the can for base metals.

In late afternoon trading on the London Metal Exchange, the three-month copper delivery futures contract was down 1.0% to $4,994.50 per metric tonne, extending the previous session’s losses. Additionally, lead (down 0.2%), tin (down 0.3%) and zinc (down 0.4%) futures also traded lower. However, aluminium (up 0.7%) and nickel (up 0.4%) avoided a drop into negative territory.

Meanwhile, oil futures headed for a third day of losses, as a stronger dollar combined with oversupply concerns to dominate market sentiment. The Brent front-month futures contract for December delivery was down 1.06% or 51 cents to $47.47 per barrel, while the WTI was down 1.81% or 82 cents at $44.38 per barrel.

Invariably, commodities linked stocks felt the heat. BHP Billiton (down 5.71%), Glencore (down 4.65%), Randgold Resources (down 3.64%) and Fresnillo (down 2.75%) made up for four of the five biggest blue chip fallers, with National Grid (down 3.57%) completing the dismal picture.

BHP Billiton was additionally hit by the tragic news of multiple deaths from a joint venture mine in Brazil. The major bursting of a tailings dam at a mine 50% owned by BHP in the Minais Gerais region is thought to have left at least 17 people dead and almost 50 missing in the resulting mudslides.

Midcaps Kaz Minerals (down 12.33%), Amec Foster Wheeler (down 8.62%), Premier Oil (down 6.44%) and Petra Diamonds (down 5.94%) were among the biggest fallers on the FTSE 250.

However, gains elsewhere kept the London market even. Leading the risers, Intercontinental Hotels booked in some solid gains as rumours grew that the company was mulling the possibility of a sale or merger. Bloomberg cited people familiar with the matter as saying that IHG is in discussions with financial advisers about whether to sell itself or merge with a competitor as the sector consolidates.

IAG soared off its own upgrade, nudging its guidance higher for long-term profit margin, earnings and return-on-invested-capital guidance, also making several boardroom changes at British Airways. The airline group confirmed it was now targeting a return on invested capital in real terms of 15%, compared to 12% previously, and said it believed it can deliver an operating profit margin of 12% to 15% - previously the target compared to 10% to 14%.

Finally, Inmarsat was also on a flyer as it posted third quarter profits that were given a large boost thanks to its aviation division. Total revenue for the quarter was up 7.5% on 2014, driven by an $11.9m (£7.8m) increase in aviation revenues.