Britain's top equity index retreated from three-week highs on Monday, with commodity shares falling after a factory survey in China, a major consumer of metals and oils in the world, disappointed investors. The blue-chip FTSE 100 index closed 0.4 percent weaker at 6,060.10 points, after falling to an intra-day low of 5,993.84 points. The index hit a three-week high in the previous session, but is still down more than 3 percent since the beginning of 2016 on China-related concerns.
The latest survey showed activity in China's manufacturing sector contracted at its fastest pace in almost three-and-a-half years in January, missing expectations and marking the sixth straight month of factory activity contraction. "With a week heavy on both macro and corporate data, it's all about PMI readings today and the manufacturing sector has not exactly given much to cheer about," said Brenda Kelly, analyst at London Capital Group.
"The FTSE started well but has run out of steam at 6,100, led by the energy sector as oil ... once again flounders." The UK oil and gas and mining indexes fell 1.7 percent and 0.6 percent respectively after crude oil prices slumped about 4 percent and key industrial metals prices also weakened. Shares in BP and Royal Dutch Shell fell 2.6 percent and 1.4 percent respectively, tracking weaker oil prices and after Exane BNP Paribas and Deutsche Bank cut their target prices for the stocks.
Among miners, Rio Tinto, Glencore and Anglo American fell 1.0 to 1.7 percent. A sharp decline in metals prices in the past months mainly on growing concerns about their demand in China, the world's top consumer, has lowered the weight of mining stocks in Britain's benchmark index. In late 2010, 12 miners in the FTSE 100 had a weight of about 15 percent, against only seven remaining miners that have a weight of 3.6 percent now.
The FTSE 350 mining index is currently worth around 73 billion pounds ($104 billion), in terms of the combined market capitalisation of the companies in the index, down from around 320 billion pounds when it hit the record high in May 2008. Financial services group Prudential was also among the top faller, with its shares dropping nearly 3 percent following the retirement of its executive director Michael McLintock. He will succeeded by Anne Richards later this year, subject to regulatory approval. In positive territory, communications services company BT rose 1.9 percent after posting its best revenue growth for seven years in the latest quarter, thanks to strong performance in consumer broadband.
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