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LONDON MARKETS: FTSE 100 Slides By The Most In 10 Months As May Calls Early General Election
Dow Jones News
By Carla Mozee, MarketWatch
Pound leaps above $1.26; slide in iron ore and copper prices hits miners
U.K. stocks slumped by the most in almost 10 months on Tuesday after Britain's Prime Minister Theresa May called an early general election in a bid to strengthen the government's position in the upcoming Brexit negotiations.
The FTSE 100 stumbled 1.6% to 7,209.48, on course for its largest percentage drop since June 2016, according to FactSet data. No sector moved higher.
A selloff in mining shares had already helped pull the FTSE 100 down about 1% before news that Prime Minister May planned to make an unscheduled statement.
Losses accelerated as the pound surged after May said she wants an early general election to be held on June 8 (http://www.marketwatch.com/story/uk-leader-theresa-may-calls-snap-general-election-on-june-8-2017-04-18). It's needed, she said, because other parties in parliament are opposed to the Conservative-led government's Brexit plans.
"Our opponents believe that because the government's majority is so small, our resolve will weaken and that they can force us to change course. They are wrong," she said.
British blue-chips fell as the pound rose, as a stronger pound can cut into earnings and sales made overseas by U.K. companies.
"Arguably a stronger government might be able to get a better deal for the U.K. and this could support sterling, but this is likely to be at the margins," said Neil Wilson, senior market analyst at ETX Capital, in a note.
"A stronger Tory majority government could push through a more aggressive version of a hard Brexit that is negative for the pound."
Sterling was at its highest since early February, FactSet data showed. It hit an intraday high of $1.2671 compared with $1.2540 late Friday in New York. It had hit an intraday low of $1.2515 just after news that May planned to make an unscheduled statement.
Miners: On Tuesday, shares of iron ore and copper producer Anglo American PLC (AAL.LN) dropped 3.3%. Shares of iron ore heavyweights Rio Tinto PLC (RIO) (RIO) (RIO) and BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) slid 2.7% and 3.7%, respectively.
The moves in miners came as iron-ore prices slumped to five-month lows and copper prices erased most of last week's rebound, Accendo Markets said in a note early Tuesday.
"[I]nvestors believe major restocking from Chinese stimulus may now be complete. Said price falls are clearly ignoring Chinese GDP picking up from recent 6.7% lows to hit 6.9% -- fastest since Q3 2015 -- albeit fueled by credit and infrastructure investment and a relentlessly booming property market," wrote analysts Mike van Dulken and Henry Croft of Accendo.
The basic materials group makes up about 8% of the FTSE 100's weighting.
"That iron ore prices are descending further into bear market territory is a particular worry for the FTSE 100. Commodity and multinational companies have contributed some of the biggest gains in the last 12 months," said Jasper Lawler, senior market analyst at London Capital Group, in emailed comments.
Among other mining moves, Glencore PLC (GLEN.LN) (HSBA.LN) gave up 3%, while Antofagasta PLC (ANTO.LN) fell 2.8%. Gold producers Fresnillo PLC (FRES.LN) and Randgold Resources PLC (RRS.LN) (RRS.LN) lost 2.3% and 1.4%, respectively.
Oil prices fell further as the session wore on, down about 1%. Shares of oil producer BP PLC (BP.LN) (BP.LN) fell 3.5%, and rival Royal Dutch Shell PLC (RDSB.LN) (RDSB.LN) lost 2.3%.
(END) Dow Jones Newswires
April 18, 2017 07:40 ET (11:40 GMT)Copyright (c) 2017 Dow Jones & Company, Inc.
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