A strong downbeat feeling pervaded the British markets on Wednesday as the vast majority of companies on the FTSE 100 index slumped lower.
The FTSE 100 fell back by 83 points, or 1.4%, closing the day at 5,774. The FTSE 250 index descended by 145 points, or 1.3%, to close at 11,494.
“Wednesday afternoon has brought us the biggest FTSE move in a dozen sessions,” said Will Hedden, a trader at IG Index. “The cynical bears had been looking for this day, when an easy 50-60 points could be taken out of the market with little effort. All that was required were a few heavyweight sectors to pull together and the low summer volume would take care of the rest. Today the mining and energy sectors duly obliged each knocking 12 points off the FTSE 100.”
The main decliners on the benchmark FTSE 100 index were the miners Kazakhyms (KAZ) and Eurasian Natural Resources (ENRC), but other major miners followed close behind. The miners both had their ratings cut by analysts today.
Kazakhyms is set to report interim 2012 earnings on Thursday and the market is expecting the copper producer to report a 40% fall in profits compared to the same period last year, says Mike van Dulken, head of research at Accendo Markets. The expected profit plunge is the result of challenging macro-trends such as higher costs and lower commodity prices. Meanwhile, Kazakhyms also owns a 26% stake in Eurasian Natural Resources, which has also been suffering from similar price and macro-economic issues, says van Dulken.
Shares in the mining giant BHP Billiton (BLT) also fell by nearly 2% after the miner reported a drop in earnings, blaming the results on weak commodities demand and cost pressures. However, the miner also boosted its dividend.
There was one controversial bright spot in the markets on Wednesday at shares in Scottish and Southern Energy (SSE) pushed up by 1%. “The UK energy provider had warned that fixed prices were due to rise this October and they haven’t let us down, announcing a 9% increase will soon hit customers,” explains Hedden. “It marks the ever close onset of another difficult winter for UK consumers already dealing with the double dip recession.”