More weakness among mining firms dragged the FTSE 100 Index lower yesterday while supermarket Sainsbury's caught investors off-guard with a surprise fundraising.
The retailer led the fallers for much of the session following the £445m exercise, but weaker metal prices and a stronger dollar meant most of the damage was done by the heavyweight miners.
The Footsie closed 50.11 points down at 4278.46 – the fir
st finish below its recent floor of 4,300 since the beginning of May.
Brighter economic news also failed to boost sentiment, despite a slower than expected rise in UK unemployment, while Bank of England minutes also highlighted "encouraging" signs of potential recovery.
But the MPC added that "significant risks remained domestically and overseas" and warned: "Adverse shocks had the potential to derail the improvement in confidence and forestall the recent improvement in economic conditions."
The committee concluded that medium-term prospects had not "changed materially" from last month – when Bank forecasts showed inflation undershooting its 2 per cent target even with the record stimulus currently being applied.
With US markets virtually flat in early trading, miners led the London market lower as the sector's difficult run continued.
Xstrata was the leading faller, nursing a 10 per cent loss of 73p to 6431/2p despite a broker upgrade. It was closely followed by Lonmin and Kazakhmys – off 110p to 1191p and 54p to 6281/2p respectively – as the miners littered the fallers' board.
They were joined by Sainsbury's, which fell 183/4p to 313p despite another impressive recent trading performance, with like-for-like sales up 7.8 per cent for the first quarter of its financial year. Shares were diluted by the fundraising move as Sainsbury's stepped up its pursuit of Tesco by building an additional £445m war chest to spend on store expansion.
The UK's third biggest grocery chain is turning to shareholders for the cash to help fund a total £2bn strategy that will see it add around 2.5 million sq ft in store space by March 2011.
The risers' board was again led by telecoms firms after BT extended its positive run into a second session following an upgrade from broker Morgan Stanley on Tuesday.
BT added 31/8p to 1055/8p yesterday, although it was beaten to the top spot by mobile phone giant Vodafone. The firm rose 41/4p to 119p after reports it was close to a tie-up with Germany's Deutsche Telecom.
Outside the top flight, engineering consultancy WS Atkins rose 3 per cent, or 18p, to 557p after it announced a 12 per cent rise in annual profits and said it was well placed to ride out the recession.
However, the leading riser in the FTSE 250 was IT services firm Logica, 5 per cent higher, or 31/2p, at 751/2p after Deutsche Bank upgraded the firm to buy and lifted its target price to 100p.
But shares in National Express shed 241/4p to 2863/4p, even though it said it had been given extra breathing space on its £1.2bn debt pile until the end of this year.
The group faced reverting to tighter lending terms from next month, but now has six months' grace.
Collins Stewart nonetheless lowered profit forecasts for the firm, citing concerns over its struggling UK rail arm.
The four biggest Footsie risers were Vodafone, BAE Systems up 81/2p to 336p, and AstraZeneca ahead 67p to 2704p.
The biggest Footsie fallers were Xstrata and Lonmin.
