London close: FTSE falls to 3m low after threefold commodities blow

London stocks closed at their lowest in over three months on Wednesday as industrial and precious metals were hit by China angst and the strong dollars, oil slumped and investors struggled to decide what to make about the latest UK inflation data.

The FTSE 100 lost 113.77 points and finished down 1.49% to 7,497.87, its lowest closing level since 26 April, with the FTSE 250 falling 0.92% to 20,320.35. A weaker pound did not provide its habitual benefit to the blue chip index, with sterling dropping 0.2% against the dollar to 1.2697 and giving up earlier gains on the euro to fall 0.15% to 1.1199.

Mining shares, a heavy weighting in the blue chip index, suffered heavy losses on the back of US dollar strength and falling metals prices, with Anglo American, Antofagasta, Glencore, BHP Billiton and Rio Tinto all under pressure. A stronger greenback makes dollar-denominated commodities more expensive for holders of other currencies, with copper, lead, nickel and zinc all suffering.

Traders are concerned the Chinese economy is cooling, said market analyst David Madden at CMC Markets, and yesterday’s disappointing fixed asset investment and industrial production reports from Beijing confirmed their fears. "The renminbi has been steadily losing ground versus the US dollar since March and it’s near its all-time-low, and that sums up the cautious sentiment surrounding China."

Gold miners were also being hit by the muscular dollar, with Fresnillo, Randgold, Centamin and Hochschild Mining all tumbling.

“Gold’s accelerating slide may seem all the more surprising," said Russ Mould, investment director at broker AJ Bell, "since it is seen by some as a haven in times of strife and could therefore be a possible beneficiary of wider concerns over Turkey’s woes and their possible impact upon emerging and financial markets more generally.

“However, one powerful force is working against gold and that is the dollar. Like most raw materials gold is priced in dollars, so if the greenback goes up then the precious metal becomes more expensive to buy in local-currency terms, potentially dampening demand."

Completing the commodities triumvirate, oil producers from BP and Shell to Premier and Tullow were knocked lower as Brent crude oil sank 2.5% to just over $70 after US government data showed an unexpected jump in stockpiles of crude, compounding pressure as the outlook for global economic growth darkened and the stock market declined.

US commercial crude inventories rose by 6.8m barrels in the week through 10 August, according to the energy information administration, contrary a in a Reuters poll which had seen analysts forecast that stockpiles would fall by 2.5m barrels.

On the positive side, the Turkish lira gained ground as Qatar promised to pour $15bn "in direct investments in Turkey", officials in Akara said, with the money said to be "channeled into Turkey’s financial markets and banks".

Back in the UK, market participants were focused on inflation figures for July, which showed a slight uptick for the first time since November, although the measure used to determine rail fare hikes came in lower than expected.

The consumer price index in July was up 2.5% on the same month a year ago, the Office for National Statistics revealed, with the rate picking up from 2.4% in the previous three months, as economists expected but undershooting the Bank of England's 2.6% forecast. CPI was flat on a month-on-month basis.

Core CPI, which excludes prices for fuel and food, remained at 1.9%, in line with forecasts. CPIH, the ONS's preferred measure as it included a measure of owner occupiers' housing costs, also remained unmoved, at 2.3%.

Factory gate inflation edged down from 3.3% to 3.1%, but input price inflation spiked up further from 10.2% to 10.9%.

“Transport tickets and fuel, along with often erratic computer game prices, drove up costs for consumers," said ONS head of inflation Mike Hardie. "On the other hand, there was a drop in prices for women’s clothing and footwear, and some financial services."

Meanwhile, Land Registry figures revealed average UK house prices increased 3.0% for June, beating the estimated 2.6% but down from May's revised-up 3.5%.

In corporate news, RBS ticked down despite confirming it will pay an interim dividend of 2p a share on 12 October after reaching a final settlement with the US Department of Justice.

Outside the FTSE 350, games developer Frontier Developments tripped to a one-year low after China's Tencent, which holds 9% of the UK company, reported a first quarter-on-quarter decline in net income in more than a decade, with its smartphone games segment hit by regulatory issues.

On the upside, insurer Admiral topped the FTSE 100 as it racked up strong gains as its first-half pre-tax profit beat expectations. Peer Direct Line was lifted in its slipstream.

GlaxoSmithKline was not far behind as it reported positive results from clinical trials of its once-monthly injectable treatment for HIV, while generic pharmaceuticals maker Hikma Pharmaceuticals surged after lifting its full-year revenue forecasts for its top two businesses.

FTSE 250 infrastructure group Balfour Beatty rallied after reporting a rise in first-half profit as its turnaround programme bears fruit, hiking its interim dividend by 33% and saying it was confident of meeting its full-year expectations.

On the broker note front, Mitchells & Butlers and Greene King fizzed higher after upgrades at HSBC, while Esure was boosted to ‘hold’ by Berenberg.

Market Movers

FTSE 100 (UKX) 7,497.87 -1.49%
FTSE 250 (MCX) 20,320.35 -0.92%
techMARK (TASX) 3,528.16 -0.41%

FTSE 100 - Risers

Admiral Group (ADM) 2,062.00p 3.20%
GlaxoSmithKline (GSK) 1,591.00p 1.95%
WPP (WPP) 1,243.50p 1.76%
Direct Line Insurance Group (DLG) 334.20p 1.58%
Micro Focus International (MCRO) 1,228.50p 0.70%
Rightmove (RMV) 4,912.00p 0.37%
National Grid (NG.) 821.20p 0.34%
easyJet (EZJ) 1,550.00p 0.03%
Shire Plc (SHP) 4,425.00p -0.02%
Royal Mail (RMG) 454.00p -0.07%

FTSE 100 - Fallers

Fresnillo (FRES) 897.00p -7.79%
Anglo American (AAL) 1,549.20p -6.20%
Antofagasta (ANTO) 833.00p -5.66%
Glencore (GLEN) 298.29p -5.66%
Evraz (EVR) 488.90p -5.54%
Randgold Resources Ltd. (RRS) 5,018.00p -5.36%
BHP Billiton (BLT) 1,612.80p -5.22%
Rio Tinto (RIO) 3,649.50p -3.32%
Ocado Group (OCDO) 1,016.50p -2.87%
Smurfit Kappa Group (SKG) 3,126.00p -2.86%

FTSE 250 - Risers

Hikma Pharmaceuticals (HIK) 1,745.00p 5.95%
Syncona Limited NPV (SYNC) 271.00p 3.24%
Bank of Georgia Group (BGEO) 1,670.00p 3.14%
Entertainment One Limited (ETO) 350.60p 2.10%
TBC Bank Group (TBCG) 1,580.00p 2.07%
Riverstone Energy Limited (RSE) 1,228.00p 1.99%
FDM Group (Holdings) (FDM) 963.00p 1.69%
Cobham (COB) 127.30p 1.64%
Equiniti Group (EQN) 216.50p 1.40%
Auto Trader Group (AUTO) 444.10p 1.37%

FTSE 250 - Fallers

Kaz Minerals (KAZ) 549.53p -10.64%
Premier Oil (PMO) 108.60p -8.12%
Ferrexpo (FXPO) 159.30p -7.28%
Greencore Group (GNC) 166.80p -6.40%
CLS Holdings (CLI) 223.50p -6.37%
Just Group (JUST) 89.95p -6.25%
Tullow Oil (TLW) 213.40p -5.41%
Energean Oil & Gas (ENOG) 511.00p -5.37%
Centamin (DI) (CEY) 105.38p -5.21%
Playtech (PTEC) 520.60p -4.83%