LONDON MARKETS: Mining Stocks Lead Rout In London On Gloomy Global-growth Outlook

By Carla Mozee, MarketWatch

Index hits session lows after weak U.S. retail-sales data

LONDON (MarketWatch) -- U.K. stocks dropped sharply Wednesday, with mining stocks hit hard as copper prices tumbled and the World Bank downgraded its forecast for global growth.

The FTSE 100 fell 2.4% to 6,388.46, hurt even more than other major European benchmarks because of its heavy weighting of commodity-related shares. The index fell to session lows as losses for U.S. stocks (SPX) (DJI) accelerated. That move came after U.S. retail sales sank in December, with most stores posting surprisingly weak results during the busiest month of the shopping season.

"With the U.S. economy continuing to solely carry the torch in the race to global recovery ... there are some concerns that the U.S. economy is slowing down after this performance, as well as some indicators we have received within the past week," said Jameel Ahmad, market analyst at FXTM, in emailed comments. However, as third-quarter gross domestic product was recently confirmed "at an outstanding annualized 5%, it was always expected that we would see some sort of slower economic momentum."

Mining stocks dropped in London trade as copper prices fell to levels not seen since mid-2009 on concerns about a supply glut. Copper is considered to some investors as a harbinger of the global economy. Meanwhile, the World Bank on Tuesday said it now expects the global economy to expand 3% in 2015, down from its earlier forecast of 3.4%. Strengthening in the U.S. economy and the fall in oil prices won't be enough to offset troubles in the eurozone and emerging markets, the institution said.

In the mining group, shares of copper producers Antofagasta PLC and Fresnillo PLC fell 4.8% and 1.9%, respectively. Glencore PLC tumbled 11%, Anglo American PLC lost 9.3% and Rio Tinto PLC (RIO) declined 4%.

BHP Billiton PLC (BHP) shares gave up 5.3%. S&P Capital IQ on Wednesday downgraded its rating on BHP to hold from buy. "We expect weaker commodity prices to increasingly impact on group profits as hedges expire and see currency headwinds from a stronger [U.S. dollar]," Clive Roberts, S&P Capital IQ equity research analyst, said in a Wednesday note.

BHP's next update is due on Jan. 21, with the release of its December 2014 operational review.

For copper, both "the negative momentum and the technical situation suggest that the price slide could continue for the time being," said commodities analysts at Commerzbank in their daily report. But when "prices bottom out, the countermovement could therefore be pronounced."

Some stocks that had been higher lost ground during the afternoon. AstraZeneca PLC (AZN) shares flipped 0.8% lower. The shares had been up after the drug maker said a study of its blood-thinning Brilinta tablets showed they reduced the risk of heart attack in patients who have had previous attacks.

Luxury-goods maker Burberry Group PLC posted better-than-expected same-store sales growth for the third quarter. Shares turned lower by 1.3%.

But Tesco PLC shares rose 0.9% after a ratings upgrade to outperform from neutral at Exane BNP Paribas. After being "mismanaged," Britain's largest supermarket chain operator "now has a very credible new CEO who is rapidly driving changes, motivating staff and improving sales," analyst John Kershaw wrote.

Tesco shares held to higher ground after S&P during afternoon trade downgraded the company to junk status, bringing its rating to BB+ from BBB-. The turnaround measures Tesco recently outlined "do not go far enough to support an investment-grade rating," said S&P in a statement.

Subscribe to WSJ: http://online.wsj.com?mod=djnwires