Sector movers: Mining stocks sink as markets extend drop

Not even the hope of more stimulus in China could help mining stocks on Thursday, as shares in the sector tanked on the back of global slowdown concerns.

Miners were bearing the brunt of the fourth day of losses for London's equity market after the news that banks took up fewer-than-expected loans from the European Central Bank's second round of liquidity operations, sparking concerns that banks are holding back on lending.

Markets had risen initially on the back of a Reuters report saying that China told banks to issue more loans in the final months of 2014 to boost lending.

Gold prices declined for a second straight day as the dollar rose on the back of continuing speculation that the Federal Reserve will soon raise interest rates. Gold was down 0.9% at $1,218.50 an ounce on the COMEX in New York.

Precious metal miners Randgold Resources and Fresnillo were leading the fallers on the FTSE 100 in afternoon trade, with both stocks down around 5%. Second-tier peers Centamin and Hochschild Mining were also suffering heavy losses.

Meanwhile, diversified heavyweights Glencore, Anglo American, BHP Billiton and Rio Tinto were all falling.

BHP Billiton, the world's largest miner, was in focus after its chief executive Andrew Mackenzie told reporters that the company is "likely to invest a lot more in copper than we are in iron ore" after a near-50% plunge in the latter this year. The stock was nearly 3% lower.

Rio Tinto was being weighed down by comments from Investec analyst Hunter Hillcoat recommended a "cautious approach" to the stock. He said: "We believe the market is currently entirely focussed on spot commodity prices and note that under spot assumptions our five-year free cashflow forecasts would reduce by 55%, obliging reduced capex, higher gearing levels and/or tempered dividend growth."

Investors were also reacting to a pick-up in unemployment in Australia, one of the largest producers of metals in the world, where the jobless rate increased from 6.2% to 6.3% in November.

Analyst Craig Erlam from Alpari said that the country is "going through a rough time at the moment as it attempts to rebalance the economy and remove its reliance on the once-booming mining sector".

Top performing sectors so far today
Industrial Transportation 2,661.90 +0.21%
Oil Equipment, Services & Distribution 16,135.41 +0.11%
Pharmaceuticals & Biotechnology 12,855.30 +0.09%
Fixed Line Telecommunications 4,658.62 +0.03%
General Retailers 2,857.99 +0.03%

Bottom performing sectors so far today
Mining 13,604.10 -3.33%
Industrial Metals & Mining 1,349.66 -3.01%
Tobacco 40,451.46 -1.82%
Forestry & Paper 11,417.64 -1.58%
General Industrials 3,814.58 -1.58%