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Heavily weighted mining stocks tumbled in London on Thursday, dragging on the main indexes as investors continued to react to a shock U.S. consumer price reading a day earlier.
The FTSE 100 index
UKX,
fell 1% to 6,929.68, after rising 0.8% on Thursday. The pound
GBPUSD,
was flat at $1.4047. London stocks fell in reaction to Wall Street’s sharp losses on Wednesday, after a surprise jump in consumer prices sparked concerns that the Federal Reseve may act sooner rather than later if the economy runs too hot.
U.S. producer prices released on Thursday showed the 12-month rate of producer prices climbing to a 10 1/2-year high of 6.2% from 4.2%. That is as weekly initial jobless claims fell 34,000 to a post-COVID-19-pandemic low of 473,000. European stocks pared losses and U.S. stocks were set for modest gains.
But commodity prices remained under pressure, with China iron ore prices tumbling earlier in the day. Moves earlier in the week by several Chinese commodity exchanges to lift trading and margin limits on iron ore contracts had failed to cool prices that have been surging.
On the Chicago Mercantile Exchange, the most-active May futures contract
TIOK21,
for 62% iron-ore fines delivered to China was down 1.7% to $214.99 per metric ton.
Mining stocks fell in step with weak iron ore prices. Shares of Rio Tinto
RIO,
RIO,
Anglo American
AAL,
AAL,
and BHP
BHP,
BHP,
all fell more than 4% each.
AJ Bell investment director Russ Mould pointed out that the industrial metals and mining sector has been a top performer in London within the FTSE 350
NMX,
this year, with precious metals and mining ranking ninth out of 40.
“Industrial metals and mining is also the leading sector on a three- and five-year view. That may lead some investors to wonder if they have missed the boat,” said Mould in a note to clients. If “inflation grabs hold, or we simply get a rip-roaring economic recovery, or commodities are in the early stages of a new ‘supercycle,’ as some are suggesting, then miners could yet offer some of the treasure that portfolio builders are seeking.”
Energy names also fell, tracking losses for crude oil futures
CL.1,
BRN00,
last down over 2% for both West Texas Intermediate and international benchmark Brent. Shares of BP
BP,
BP,
and Royal Dutch Shell
RDS.A,
RDS.A,
slipped around 2% each.
Luxury-goods name Burberry
BRBY,
fell 6%. The company posted a fall in same-store sales for fiscal 2021 from a year ago, and said fourth-quarter sales were still down from pre-pandemic levels, although operating profit climbed on an annual basis. But fourth-quarter sales rose sharply, boosted by China and the U.S.
Another big name reporting on Thursday was BT
BT.A,
BTGOF,
which said on Thursday that it will explore funding additional fiber broadband deployments via a joint venture with external parties. The telecom reported lower fiscal 2021 fourth-quarter adjusted earnings and revenue. Shares fell about 7%.
“The market is in no mood to take an upbeat view of results, and BT and Burberry have become the latest to feel the wrath of investors too concerned about holding on to recently-made profits,” said Chris Beauchamp, chief market analyst at IG, in a note to clients. “The rush for the exit continues, and will continue to drag down plenty of good stocks along with the bad for now.”
And shares in chip maker Alphawave IP slumped around 20% in their debut, after the Canadian company raised £856 million ($1.2 billion) in that initial public offering.
