Sector movers: Resource stocks hammer London market

Volatile oil and metal prices dented confidence in the London market on Tuesday, with a plethora of resource stocks taking a beating.

The FTSE 100 closed 1.42% or 88.30 points lower at 6,135.22, while the FTSE 250 ended 0.95% or 164.20 points at 17,191.90. Oil futures endured another volatile session, after OPEC rolled over its crude production level, last set at 30m barrels per day, following the conclusion of its oil ministers' summit in Vienna, Austria late last week.

At 1705 GMT, the Brent front month futures contract was down 0.39% or 16 cents at $40.57 per barrel, while the WTI was down 0.13% or five cents at $37.60 per barrel, with both contracts having posted sharp declines for much of the session.

Julian Jessop, head of commodities research at Capital Economics, said, “Brent’s (short-lived) dip below $40 per barrel is a further damning verdict on OPEC’s bungled communications after its meeting last Friday.

“However, it was never likely that the group would agree to cut output to boost prices. Instead, any recovery next year will depend on reductions in non-OPEC supply and on stronger demand. On this basis, while we are lowering our end-2016 forecast for Brent from $60 to $55, we continue to expect oil prices to stage a partial recovery next year.”

Furthermore, most metal futures registered late afternoon declines in Europe. At 1635 GMT, three-month delivery contracts of primary aluminium (down 1.6%), nickel (down 1.0%), tin (down 0.1%), lead (down 0.4%) and zinc (down 1.6%) were trading lower on the London Metal Exchange. The copper contract, still at historic lows, remained under pressure, up 0.4% to $4,589.00 per metric tonne.

Invariably, the biggest blue chip fallers of the session included a veritable who’s who of the mining industry with Anglo American (down 12.29%), Rio Tinto (down 8.37%), Antofagasta (down 7.57%) and Glencore (down 6.92%) dragging the FTSE 100 lower.

Furthermore, Anglo American said it will suspend its dividend to investors this year and the next as it announced a "radical" portfolio restructuring and further material costs savings and capex reductions to combat declining commodity prices.

The miner said it will cut its number of assets by 60% as it looks to deliver free cash flow and greater returns through the cycle. In addition, it will consolidate from six to three businesses: De Beers, Industrial Metals and Bulk Commodities. Among the midcaps, Petra Diamonds (down 5.78%) was the standout natural resource loser.

Over a session short on positivity, only two blue chips Sainsbury’s (up 1.24%) and BP (up 0.06%) ended up in positive territory, with latter benefitting from the oil price staging a late, albeit tepid recovery.