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FTSE slides 2.6pc as mining merger news fails to inspire
London's FTSE 100 Index slumped 2.6 per cent into the red on Monday as global economic worries heaped pressure on commodity stocks.
Miners led the falls on concerns of a setback to recovery, with the prospect of a mammoth merger between Xstrata and Anglo American failing to offset the declines.
The Footsie 100 Index dropped 111.88 points to stand at 4234.05, hitting its lowest close for nearly two months.
America's Dow Jones also suffered hefty falls, down more than 2 per cent in early trade as the World Bank took an even gloomier view of prospects this year.
The Washington-based global lender predicted the world economy would shrink by 2.9 per cent this year, compared to its previous 1.7 per cent estimate.
The World Bank cut its GDP forecasts for Japan, as well as the United States and the euro area for this year and next. The bank was releasing details on individual economies for the first time yesterday.
Concerns that investors might have been too quick to price in a quick and lasting recovery prompted stock markets to retreat last week after a powerful rally from their March lows
Indices across Europe were also deeply in the red, with the Cac 40 in France down 2.6 per cent and Germany's Dax off more than 3 per cent.
The knock to recovery hopes sent the cost of crude oil back below 68 dollars, while prices also plummeted for metals and other commodities.
Even confirmation from Xstrata over its interest in a merger with Anglo American failed to lift stocks, although it helped Anglo move up 75p to 1698p.
The news did not inspire shareholders in Xstrata, which fell 457/8p to 6351/8p.
Platinum firm Lonmin, which is a former target of Xstrata, also fell 102p to 1148p. But Vedanta Resources was the worst off in the sector, down 8 per cent, or 120p, to 1302p.
British Airways was the leading faller – down 9 per cent or 113/4p to 1245/8p – amid rumours over its financial position and following weekend reports that it is considering selling OpenSkies only a year after acquisition.
Virgin Atlantic founder Sir Richard Branson increased the pressure on the airline by insisting the Government should not bail out the firm.
In a difficult session for the leisure and travel sector, Thomas Cook shares fell 131/4p to 207p and InterContinental Hotels dropped 27p to 596p.
Energy companies were also nursing heavy falls after the latest fall in crude prices.
Among the index heavyweights, Royal Dutch Shell was down 65p to 1543p, BP shed 19p to 478p and BG Group lost 65p at 1001p.
Positive broker comments however helped a few firms make progress.
Engineering group Smiths rose 221/2p to 6711/2p after Deutsche Bank recommended the stock as a recovery play, although property firm Hammerson lost earlier gains seen after Evolution brokers began coverage with a buy. It later slipped 63/4p to 3061/2p.
Outside the top flight, shares in directories firm Yell fell more than 13 per cent, down 4p to 251/2p, after its annual report warned that the group may need to have the terms of its debt eased for a second time.
The only Footsie risers were Anglo American, Smiths Group, Bunzl advanced 2p to 4851/2p and Severn Trent added 3p to 1107p.
The biggest Footsie fallers of the session were British Airways, Vedanta Resources, Lonmin and Kazakhmys.
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Weather for Yorkshire
Wednesday 23 May 2012
Today
Sunny spells
Temperature: 11 C to 24 C
Wind Speed: 12 mph
Wind direction: North east
Tomorrow
Cloudy
Temperature: 9 C to 22 C
Wind Speed: 12 mph
Wind direction: North east
