Sector movers: Natural resource related stocks continue lower but market recovers

Declines in mining, metals and oil and gas stocks continued on Wednesday but positivity elsewhere pulled the London market back into positive territory.

The FTSE 100 rose 0.41% or 24.77 points to 6,083.31, while the FTSE 250 rose 0.27% or 45.37 points at 16,885.73. Base metals and oil continued to flag up wider commodities market volatility caused by China’s correction. The country still consumes approximately half of the world’s iron ore, 48% of aluminium, 46% of zinc and 45% of copper.

Past the midway point of trading on the London Metal Exchange, all major futures contracts, except tin (up 5.4%), were trading lower. Three-month delivery contracts of primary aluminium (down 0.2%), copper (down 0.3%), lead (down 0.4%), nickel (down 1.8%), and zinc (down 1.8%) saw moderate to sharp declines.

Oil benchmarks continued to grapple with exceptional volatility. Both Brent and WTI rose 8% on Monday, only to plummet by over 10% and 7% in the next session, and posting wild swings for much of the Asian and European session on Wednesday. At 1539 BST, the Brent front month futures contract was down 0.81% or 40 cents to $49.16 per barrel, while the WTI was down 1.85% or 84 cents at $44.57 per barrel, with both benchmarks in constant intraday fluctuation mode.

Invariably a plethora of natural resources related stocks registered sharp declines. Glencore (down 8.02%) led the FTSE 100 fallers for yet another day, joined by Randgold Resources (down 2.45%) and BP (down 1.17%).

On the FTSE 250, Ophir Energy (down 6.87%), Lonmin (down 6.47%) and Tullow Oil (down 6.08%) were among the biggest fallers. Kaz Minerals (down 4.42%) and Premier Oil (down 4.39%) also registered noticeable declines.

However, positivity elsewhere prevented the market from ending lower. Royal Dutch Shell saw the effects of oil market volatility on its share prices mitigated as the European Commission gave an unconditional merger clearance for its £47bn recommended cash and share offer for BG Group.

British Airways owner International Consolidated Airlines Group (IAG) gained after announcing that its offer for Aer Lingus is closed and it now controls 98.05% of the Irish carrier.

IAG said that Aer Lingus shareholders who accepted the offer will receive payment for their shares within 14 days. This includes Ryanair, which had a nearly 30% stake in the carrier and the Irish government, which owned 25.1%.

Pharmaceutical stocks rose as Barclays upgraded Hikma Pharmaceuticals lifting its price target on the stock to 2,760p from 2,050p.The bank said Hikma has transformed its US exposure and long-term visibility through the $2.65bn acquisition of US specialty generics company Roxane.

AstraZeneca also got a boost from a broker note, as HSBC lifted its stance on the pharmaceuticals giant to ‘buy’ from ‘hold’ on share price weakness and ahead of oncology news flow. It noted that the shares have fallen 8% since the beginning of August and 16% since the year’s highs in April.