FTSE drops on China concerns

The FTSE 100 Index dropped back below the 5600 level today as concerns over moves to calm China’s economy hit mining stocks hard.

Fears that China may take potential monetary policy action to ease inflation and therefore dent demand for commodities saw metal prices drop sharply, sending blue chip miners into the red.

Early session falls on America’s Dow Jones Industrial Average added to the downbeat sentiment and left the wider FTSE 100 Index closing down 31.8 points at 5593.9.

And in currency news, the pound slipped against the dollar after another round of opinion polls fuelled anxiety over the prospect of a hung parliament.

US stocks fell after sentiment was impacted following news that Moody’s believes the US could eventually lose its top-notch credit rating.

This came after mixed reports on manufacturing activity, with data showing it slowed in New York in March, while another revealed a rise in nationwide industrial production last month.

American investors also fretted over the strength of the economic recovery and energy demand, which knocked oil prices below 80 dollars for the first time in nearly two weeks.

Wall Street anxiety was compounded further ahead of a new banking bill due to be unveiled in the US tomorrow, with uncertainty over whether the bill would get the necessary support from the Senate.

In London, blue chip miners accounted for most of the top 10 fallers, led by Eurasian Natural Resources, down 40 at 1133p.

But elsewhere, BT and Morrisons were making gains in the wake of favourable broker comment, up 1.4p at 124.7p and 0.4p at 295p respectively.

Centrica advanced to the top of the risers board thanks to Nomura raising its rating on the British Gas parent, with shares 4.7p higher at 294.7p.

Royal Bank of Scotland rose 0.2p to 42.7p after reports said the part-nationalised firm was among those lined up to work on an initial public offering worth €800m by German chemicals company Brenntag.

Among other top flight movers, BSkyB slipped 14p to 584p on fading speculation that Rupert Murdoch’s News Corp is planning to take the satellite broadcaster private. The media group already owns around 40% of BSkyB.

While Citigroup named Morrisons as its preferred pick of the supermarket sector, it also lifted its price target on Tesco and Sainsbury, causing shares in Tesco to improve by a marginal 0.05p to 435.4p, although Sainsbury dropped 0.2p to 332.5p.

Outside the top flight, shares in French Connection surged more than 9%, or 4.75p to 46.75p, after it sold its Nicole Farhi brand and refused to rule out a return to private ownership.

The company posted losses of £24.9m (€27.4m) for the year to January 31, up from £16.4m (€18m) the previous year.

The biggest Footsie risers were Centrica up 4.7p at 294.7p, Shire ahead 17p at 1466p, BT Group up 1.4p at 124.7p and Admiral up 13p at 1251p.

The biggest Footsie fallers were Eurasian Natural Resources down 40p at 1133p, Wolseley off 56p at 1620p, Antofagasta down 32p at 1001p and Fresnillo down 26p at 820p.