Shares on the London Stock Exchange yesterday slumped to their lowest level since mid-April, led by energy and mining companies as crude oil fell to a three-week low and copper prices slipped for a third day.
Shares on the London Stock Exchange yesterday slumped to their lowest level since mid-April, led by energy and mining companies as crude oil fell to a three-week low and copper prices slipped for a third day.
Equities sank amid signals on Tuesday from the Federal Reserve that the US central bank would be reluctant to cut interest rates again because of dollar-led inflation. The unusually explicit warning from Fed chairman Ben Bernanke sent the greenback higher against sterling and other currencies, pushing down crude and other commodity prices.
Oil shares were the biggest losers as US crude oil prices dropped to near $123 a barrel. BP fell 3.9%, while gas producer BG Group lost 2.8%.
Miners posted substantial losses with Vedanta, Kazakhmys and Anto-fagasta all falling between 4.2% and 2.1%. The market's FTSE-100 blue-chip index ended the session down 87.6 points at 5970.1 marking the first sub-6000 close since April 15.
"We might see several hundred points off the FTSE over the next two or three months as a result of the resources stocks weakening," said Roger Cursley, a strategist at Investec.
David Fineberg, a dealer at CMC Markets, said: "The petrochemicals stocks have been the biggest losers as oil prices continue to ease, but the banks are also struggling in general as traders become wary over the possibility of resurgence of bad news in the sector whilst Vodafone is worthy of note, with the stock hitting the FTSE on the back of a dividend pay-out and concerns over its bid for Tiscali.
"US economic data has however generally impressed, underlining Bernanke's bullish outlook for the country and supporting the dollar's recent gains but this is - at least so far - failing to result in a rebound on Wall Street."
He went on to say that an interest-rate verdict from the Bank of England today "could again help remove some uncertainty but for the time being the London index is back below the key 6000 line and the downside remains exposed."
In the key banking sector, which has been hard hit by credit crunch worries, Barclays yielded ground after Fitch Ratings said the UK's fourth-biggest bank may have to raise additional capital as its finances weaken.
Persimmon led homebuilders lower after analysts at Swiss investment bank UBS recommended investors sell the shares and Davy Stockbrokers rated the industry with a "negative view.
