Economic fears and metal prices drag FTSE down

Persistent fears over the economy and weaker metal prices dragged the London market more than 2% into the red today.

Persistent fears over the economy and weaker metal prices dragged the London market more than 2% into the red today.

Falls among heavily weighted miners hit the FTSE 100 Index hard, while retail and banking stocks also declined on concerns that the Government’s housing market pep-up measures would not be enough to lift the economic gloom.

The Footsie sunk 125.4 points to 5495.3 by the mid-session, bringing an abrupt halt to its recent strong run.

Oil prices remained below 110 US dollars, but failed to offer the cheer seen in recent days amid more pressing fears over the state of the UK economy.

Pub groups were also under significant pressure after FTSE 250 firm Punch Taverns – down 16%, or 52.25p at 264.5p – said it would not pay a full-year dividend to shareholders.

Fellow FTSE 250 pub group JD Wetherspoon tumbled 17.25p to 256p and Mitchells & Butlers dropped 22.75p to 280.25p. The sector had been on the front foot yesterday after a well received trading update from brewer Greene King.

Punch’s top tier counterpart Enterprise Inns meanwhile headed the blue-chip fallers board, down 14% or 41p to 266.25p.

Retailers and banks joined pub groups in the red as recession fears lingered over the wider market.

Barclays shed 13.25p to 350.5p, while supermarket Sainsbury’s was among the worst hit retailers, down 15p at 355p as the sector lost much of yesterday’s stamp duty upside.

Next was also down, by 42p at 1091p and B&Q parent Kingfisher was off 5.3p at 135.4p.

Sentiment was also impacted by another gloomy trading update from the sector, after Currys owner DSG International announced more sales declines, suggesting that profits were likely to fall further.

DSG fell by more than 5% initially, but later clawed back losses to stand 1.25p higher at 54p.

Miners inflicted most of the damage on the FTSE 100, led by falls at Kazakhmys, down 70p at 1114p.

However, travel firms, too, gave back some of their recent gains, led by Thomas Cook down 10.75p at 235.75p. EasyJet bucked the trend with a rise of 11.5p to 390.25p as oil prices remained within sight of 100 US dollars a barrel, although BP was on the rise after a broker upgrade, ahead 3.75p at 515.25p.

Telecoms group Cable & Wireless surrendered early gains seen after it announced it had offloaded £1 billion of pension liabilities under a deal with Prudential. Shares were later down 2.7p at 176.4p.

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