Consolidation hopes in the mining sector failed to drag the London market out of the red today as lower oil prices weighed.
Xstrata confirmed its interest in a merger with Anglo American – helping Anglo’s shares more than 7% higher – but investors are still nervous over a fragile global economy.
The possible tie-up failed to have a positive impact on the rest of the market and crude edged below $68 as the FTSE 100 Index stood 51.1 points lower at 4294.9 by the mid-session.
Futures markets were signalling a lower opening on Wall Street as the World Bank took an even gloomier view of prospects this year – forecasting a 2.9% decline, compared to its previous 1.7% estimate.
British Airways was a prominent faller – down more than 6% or 8.8p to 127.6p after a newspaper said it was considering the sale of its OpenSkies subsidiary only a year after it acquired it.
Virgin Atlantic founder Richard Branson increased the pressure on the airline by insisting the UK government should not bail out the firm.
In a difficult session for the leisure and travel sector, Thomas Cook shares fell 8.5p to 211.75p and InterContinental Hotels dropped 15.5p to 607.5p.
The prospect of a merger of equals pushed Anglo American to the top of the risers’ board – up 112.5p to 1735.5p but failed to inspire shareholders in Xstrata, which fell 3% or 23.2p to 657.8p.
Other miners were also under pressure following a further fall in metal prices on a stronger dollar and the fresh doubts over economic recovery.
Platinum firm Lonmin, which is a former target of Xstrata, fell 66p to 1184p, while Vedanta Resources eased 79p to 1343p.
Energy companies were also nursing heavy falls after the latest fall in crude prices. Among the index heavyweights, Royal Dutch Shell was down 47p at 1561p, BP shed 13.1p to 483.9p and BG Group lost 44p at 1022p.
Positive broker comments however helped a few firms make progress. Engineering group Smiths rose 18p to 667p after Deutsche Bank recommended the stock as a recovery play, while property firm Hammerson was 1.5p better at 314.75p after Evolution brokers began coverage with a buy.
Outside the top flight, shares in directories firm Yell fell 10%, down 3p to 26.5p, after its annual report warned that it may need to have the terms of its debt eased for a second time.