Britain's top share index fell 1.4 percent on Thursday as sagging commodity prices dented miners and energy stocks, while reduced risk appetite hurt banks. The FTSE 100 ended down 74.43 points at 5267.70, its biggest daily fall for three weeks, after closing 0.1 percent lower on Wednesday. Miners were the biggest drag on the index as metal prices were pressured by a stronger dollar as the demand outlook darkened.
Eurasian Natural Resources, Xstrata, Rio Tinto, Antofagasta, Anglo American and Vedanta Resources fell 3.1-5.1 percent. "There's been a correlation of strength in metal prices as the dollar weakens and that is now reversing," said Grahame Exton, fund manager at Tilney Investment Management in Liverpool. The mining sector is still up 95 percent this year compared to a 19 percent gain for the FTSE 100.
An already weak market retreated further after Bank of America-Merrill Lynch cut its 2010 growth outlook for the bellwether semiconductor industry, sending US equities deep into negative territory. In Britain, the Office for National Statistics said the public sector had a net cash requirement of 5.9 billion pounds last month, nearly twice expectations.
The ONS also said retail sales rose 0.4 in October, slightly below forecasts of 0.5 percent. "There's been a bit of a reality to check, but to be honest I though it would have kicked in sooner ... We've reached dizzying heights. It appears this market sees every dip as a buying opportunity," said Philip Gillett, sales trader at IG Index.
The banking sector was generally lower. Europe's largest bank HSBC shed 1.3 percent. Barclays, Standard Chartered and Royal Bank of Scotland fell 0.9-2.8 percent.
Lloyds Banking Group gained 0.4 percent supported by news the previous session that the bank had received approval from Europe for state aid for its planned restructuring. Energy stocks also lost ground as crude slipped below $78 per dollar. Royal Dutch Shell, Cairn Energy, Tullow Oil and BP were down 1.3 to 1.7 percent.
The world No 2 brewer SABMiller bucked the weak market trend, up 3.4 percent, to be the top riser after saying it expected a second-half boost from currency movements and a fall in the cost of inputs such as barley, after price rises and cost cuts pushed up its first-half profit.
British household cleaning goods group Reckitt Benckiser added 1.1 percent on reports of a link-up with US peer Colgate Palmolive, but analysts were sceptical of an immediate tie-up. Gas and electricity transmission network operator National Grid gained 0.9 percent after it forecast a strong year on the back of low financing costs but saw no recovery in demand to pre-crisis levels for several years.
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