London close: FTSE falls to six-week low as miners continue retreat

London stocks closed at a six week low on Wednesday amid some signs of weakness in the employment market and Chinese concerns weighing on commodities companies.

The FTSE 100 finished down 0.6% to 7,372.61, closing below the 7,400 level for the first time since September, while the pound was down 0.4% versus the euro at 1.1115 but flat against the dollar at 1.3166, as the greenback was weighed by worries about the progress being made on US tax reform.

Equities are extending losses from the previous session in a "general risk-off move", said analyst Mike van Dulken at Accendo Markets, pointing to metals prices hit by Chinese data and and oil oversupply concerns.

"Compounding this are nerves about tomorrow's US tax vote and dovish comments from the Fed's Evans which have sent USD lower, resulting in reciprocal yet unwelcome GBP and EUR strength this side of the pond," he said.

In any other year Chris Beauchamp at IG said warning signs would be flashing: "Stocks are falling, volatility is on the up, China’s economic growth appears to be weakening and we even have a military coup to deal with. On the face of it, the situation would be ripe for a big selloff in equity markets, but this is not 2008 or even 2015.

"Below the surface some sectors, such as utilities, are recovering, while in the UK and Europe markets are off their lows. It is options expiration week, and a look at positioning through put/call ratios suggests sentiment has become excessively bearish.

But Thanksgiving is on the horizon, which tends to be positive for markets and with all the central bank money sloshing around the system, Beauchamp suspects "2017 will work its magic once again and the dip buyers will have their way".

CONCERNS FOR CRUDE AND UK EMPLOYMENT

Oil prices were hit by reports from the IEA and the American Petroleum Institute, which reported a surprise build-up in US inventories of crude oil and gasoline.

There were concerns for the UK consumer spending as figures from the Office for National Statistics showed average weekly earnings for the three months to September rose 2.2% compared to the same period last year, which was more than the 2.1% consensus forecast but down from a revised August figure of 2.3% and well below the 3% rate of inflation.

Earnings excluding bonuses increased 2.2% in the period, in line with the 2.2% expected by economists and growth in the preceding period.

Meanwhile, the unemployment rate stayed at 4.3% in the three months to September, as expected, but there was a 14,000 fall in employment in the three months to September, the first decline since April 2013, which dragged annual employment growth down to 0.6%, the lowest since 2012.

Barclays economists felt the report showed slowing employment growth, reversing some of the strength seen earlier this year, while Howard Archer, chief economic advisor to the EY ITEM Club, said there were "signs in the latest data that the UK labour market could be faltering after extended resilience".

MINERS MAULED, DEFENSIVES GAIN

Looking at individual stocks, miners were a big weight on the blue chip index as metals prices fell, with Rio Tinto, Glencore, BHP Billiton, Anglo American and Antofagasta all extending losses from the previous session.

TalkTalk Telecom took the worst beating as it drummed up an impressive number of new customers in the first half of the year but at the expense of profits, which fell into the red. Management reiterated that their focus in on growth before profits, but investors did not like the interim dividend being halved.

NMC Health was another at the bottom of the barrel, hurt by a note from Jefferies that commented on the company’s capital markets day. “Although the day was well-attended, we feel somewhat disappointed there was limited incremental info, which leaves narrow support for its current valuation,” the bank said, with its biggest concern remaining potential underlying pressures on the base business in Dubai.

3i Group was lower a day before its interim results.

Legal & General retreated after it said that its investment management arm, an active management powerhouse, has entered the world of passives with an agreement to acquire Canvas, an ETF platform, for an undisclosed sum.

Housebuilder Barratt Developments was on the back foot despite saying it has made a strong start to the year and remains confident of delivering a good performance in FY18, while sector peer Crest Nicholson was weaker despite posting a rise in full-year unit completions, as it warned that maintaining momentum through planning is a major challenge for the industry.

Wizz Air flew lower after it signed a memorandum of understanding with Airbus relating to the purchase of a further 146 Airbus A320neo family aircraft, while Card Factory slipped after posting revenue growth but saying margins were under pressure.

On the upside, precious metals miner Fresnillo was the standout gainer as HSBC lifted the stock ‘buy’ from ‘hold, referring to it as a “sector leader at a discount” after the shares fell 26% from their year-to-date peak of 1,825p.

Fresnillo and Randgold Resources were also benefiting from a rise in gold prices, as investors looked for a safe place to park their cash in ‘risk off’ trade. Other defensive sectors such as utilities and insurers were on the up amid some safe haven buying.

Pharma is another traditional defensive haven but AstraZeneca was trading up after it and its global biologics research and development arm, MedImmune, announced that the US Food and Drug Administration has approved its Fasenra asthma drug.

Cobham rose after saying that trading remains on track as it reiterated its full-year guidance and added that its strategic review is still ongoing.

Great Portland Estates advanced after reporting a 1% improvement in its portfolio valuation in its first half results, with the value of its developments rising 1.6% over the half-year.

Market Movers

FTSE 100 (UKX) 7,372.61 -0.56%
FTSE 250 (MCX) 19,693.38 -0.77%
techMARK (TASX) 3,424.54 -0.10%

FTSE 100 - Risers

Fresnillo (FRES) 1,325.00p 3.27%
BT Group (BT.A) 247.65p 1.60%
Bunzl (BNZL) 2,146.00p 1.47%
Vodafone Group (VOD) 229.45p 1.06%
Barclays (BARC) 182.40p 0.94%
SSE (SSE) 1,355.00p 0.89%
Randgold Resources Ltd. (RRS) 7,045.00p 0.79%
National Grid (NG.) 890.10p 0.75%
Aviva (AV.) 497.30p 0.73%
ITV (ITV) 151.00p 0.67%

FTSE 100 - Fallers

NMC Health (NMC) 2,750.00p -3.61%
3i Group (III) 898.50p -3.39%
Mondi (MNDI) 1,721.00p -3.10%
WPP (WPP) 1,253.00p -2.87%
Johnson Matthey (JMAT) 3,288.00p -2.49%
Smurfit Kappa Group (SKG) 2,197.00p -2.09%
Tesco (TSCO) 184.20p -2.05%
DCC (DCC) 7,095.00p -1.94%
Taylor Wimpey (TW.) 192.00p -1.74%
BP (BP.) 495.00p -1.59%

FTSE 250 - Risers

Cobham (COB) 130.40p 2.68%
Evraz (EVR) 287.60p 2.53%
Dairy Crest Group (DCG) 559.00p 2.47%
Great Portland Estates (GPOR) 624.00p 2.46%
International Public Partnerships Ltd. (INPP) 157.40p 2.14%
Hansteen Holdings (HSTN) 136.20p 1.95%
Provident Financial (PFG) 869.00p 1.94%
Just Eat (JE.) 803.00p 1.84%
Royal Mail (RMG) 389.00p 1.54%
Hikma Pharmaceuticals (HIK) 959.00p 1.00%

FTSE 250 - Fallers

TalkTalk Telecom Group (TALK) 178.20p -5.96%
Nostrum Oil & Gas (NOG) 348.90p -5.58%
Tullow Oil (TLW) 172.40p -5.07%
Crest Nicholson Holdings (CRST) 495.80p -4.47%
Cairn Energy (CNE) 202.00p -3.86%
Hunting (HTG) 491.40p -3.84%
Brown (N.) Group (BWNG) 271.20p -3.49%
Hiscox Limited (DI) (HSX) 1,419.00p -3.47%
OneSavings Bank (OSB) 376.90p -3.36%
Petrofac Ltd. (PFC) 397.30p -3.36%