Oil and Mining Stocks Drag FTSE 100 Lower

LONDON—Oil and mining company stocks were hammered on Thursday, dragging the entire U.K. FTSE 100 blue-chip index lower, as prices for commodities such as crude oil and copper tumbled to fresh multiyear lows on renewed fears about China's slowing economy.

The FTSE 100 index fell 2.7%, with natural-resource companies accounting for seven out of the index's top 10 worst performers in early morning trade.

Anglo American PLC, the world's fifth-largest diversified-mining company by market capitalization was the biggest loser, dropping as much as 10% while Anglo Australian miners BHP Billiton Ltd and Rio Tinto PLC, the world's No. 1 and No. 2 miners by value, fell ​5.8% and ​5.1% respectively, making them the third- and ​fifth-worst index performers. Switzerland-based miner and trader Glencore PLC was the sixth-worst performer, falling 5%.

Among oil companies, BG Group PLC was the​ eighth-worst performer in the FTSE 100 index Thursday, dropping 4.6% while Royal Dutch Shell PLC fell ​4.2% and BP PLC dropped ​4.3%. BG and Shell have agreed to merge in a bid that will be voted on by shareholders later this month.

Overall, the FTSE 350 oil-and-gas producers index was down ​4.4% while the FTSE 350 mining index was down 5​%.

"It's a fairly ominous sign," said Macquarie Research mining analyst Alon Olsha. "It's a reaction to the panic in the Chinese markets."

The drop followed a rout in Asian equity markets after the Chinese government decided to suspend stock-market trading for a second time this week after its blue-chip index fell more than 7%. Investors sold out of shares after the People's Bank of China made its largest downward adjustment to the yuan since August.

"The interpretation is that the currency-market manipulation tells you the economy is doing worse than expected," said Johan Javeus, chief strategist at SEB Group. "Maybe growth is slowing faster, and that's something we're concerned about outside China," he said.

Natural-resource companies have been particularly hard hit by China's economic slowdown since the country is the world's largest consumer of many metals, including copper and zinc which fell to fresh near seven-year lows Thursday.

China is also the world's second-largest consumer of crude oil, which fell in the U.S. to $32.09 a barrel, its lowest level in more than 11 years.

​Prices for both metals and oil have been slammed as supply far outstrips demand. On any given day, for instance, world oil supply is 1 million barrels higher than demand.

Riva Gold contributed to this article.

Write to Alex MacDonald at [e-mail]

(END) Dow Jones Newswires

January 07, 2016 06:55 ET (11:55 GMT)

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