No silver lining as miners dig a hole for FTSE

FTSE 100 CLOSE 5366.80 -123.35 | WORLD 11,823.55 -131.39

MINING stocks dragged the Footsie lower yesterday as investors questioned demand for metals and minerals amid economic slowdowns on both sides of the Atlantic.

Silver miner Fresnillo was the biggest faller in the FTSE 100 index, dropping 11.1 per cent or 187p to 1,494p.

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Randgold and Eurasian Natural Resources weren’t far behind, falling 6.1 per cent or 410p to 6,360p and 5.6 per cent or 36.5p to 611p respectively.

Other resources stocks also took a tumble, with Indian-focused oil producer Essar Energy dropping 6.5 per cent or 13.5p to 193.1p, Shell down 51.5p at 2,257p and BP 11.3p lower at 440.95p.

Energy stocks were also affected by a near 4 per cent drop in the oil price – the worst day for Brent crude since mid October.

Oil fell on the back of weakness from the euro, as the single currency continued to be punished by the never-ending eurozone debt crisis.

The euro dropped to its lowest level against the dollar for nearly a year, reflecting investors’ nerves that the eurozone crisis is still not under control. The pound strengthened to €1.19 against the euro, but was down against the dollar at $1.54.

Scottish explorers were hit by the falling oil price, with Edinburgh-based duo Cairn Energy and Melrose Resources down 7p at 268.9p and 2p at 128.5p, and Aberdeen pair Faroe Petroleum and energy services firm Wood Group down 3p at 150p and 13p at 636p.

The FTSE 100 index dropped 123.35 or 2.3 per cent to close at 5,366.8 as investors became nervous about the state of the economies of the eurozone and the United States.

Eurozone debt fears were further fuelled by Italy’s borrowing costs hitting a record euro-era high of 6.37 per cent on five-year bonds, while Germany’s funding costs dropped – a sign of investors’ confidence that they will get their cash back from Berlin.

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Sentiment was also dented by the US Federal Reserve failing to give more details on Tuesday night about its latest asset purchase scheme, hailed as “QE3”.

Yusuf Heusen, a sales trader at IG Index, said: “There’s once again no sign of any festive cheer.

“Equity markets continue to reel over the compound effects of no further hits of QE from the Fed and ongoing worries over the eurozone debt saga.”

Retailers were in sharp focus following a note from analysts at Dutch investment bank ING, which cut its rating on Tesco from “buy” to “sell” and on Marks & Spencer from “hold” to “sell”.

Analysts predicted further gloom for the retail sector in the face of Europe’s debt crisis, austerity measures and flagging consumer spending.

Fellow shop watchers at Citigroup and JPMorgan piled on the pressure, adding further negative comments. Tesco fell 3.15p to 386.35p, while M&S was 7.2p lower at 308p.

NEW YORK: Wall Street fell for a third day and hit its lowest level in two weeks yesterday as widespread risk aversion sent commodity prices tumbling, drove the euro to its lowest in a year and forced Italy to pay a euro-era rate high to sell debt.

The Dow Jones industrial average fell 131.39 points, or 1.10 per cent, to end the day at 11,823.55 while the broader Standard & Poor’s 500 Index lost 13.91 points, or 1.13 per cent, to finish at 1,211.82.

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The Nasdaq Composite Index dropped 39.96 points, or 1.55 per cent, to close at 2,539.31.