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LONDON (Alliance News) - After a strong recent run for UK equities, helped by rises in commodity prices, it was London's heavy-weight resource sector that was dragging down stock indices midday Friday.

Amongst the worst performers in the FTSE 100 were miners Anglo American, down 3.3%, and Antofagasta, down 3.1%, and oil majors Royal Dutch Shell 'B', down 1.8%, and BP, down 1.6%.

The stocks had been performing well of late with both the FTSE 350 Mining and FTSE 350 Oil and Gas producers sector indices reaching 2016 highs on Thursday. The rally has been supported by a strong recent run in commodity prices, but these have since lost steam.

"The pullback in oil and iron ore is natural after such a strong run with Brent crude running into a technical barrier around USD46," said Jasper Lawler, market analyst at CMC Markets.

Brent crude reached a high of USD46.16 a barrel on Thursday, also its highest level of the year so far, but by midday Friday, Brent traded at 44.53 a barrel.

The resource-stock heavy FTSE 100 index traded down 0.8%, or 48.38 points, to 6,333.06. The FTSE 250 fared better, trading flat at 16,975.24, and the AIM All-Share was down 0.1% to 733.36.

In Europe, the CAC 40 index in Paris was down 0.2% as was the DAX 30 in Frankfurt.

Data from Markit Economics showed that eurozone private sector flash Composite Purchasing Managers' Index, which combines manufacturing and services, fell to a two-month low of 53.0 from 53.1 in March. Economists had forecast a score of 53.3.

The flash manufacturing PMI also slipped to a two-month low of 51.5 from 51.6 in March. Economists had expected a higher score of 51.9. The eurozone services PMI edged up to 53.2 from 53.1 in March, but fell short of the 53.3 reading economists had forecast.

Before the open on Wall Street, futures pointed the Dow Jones Industrial Average flat, the S&P 500 up 0.1% and the Nasdaq 100 down 0.1%.

Premarket movement in Alphabet, the parent company of Google, was weighing on Nasdaq futures, with the stock down 5.0%. After the New York closing bell on Thursday, Alphabet reported an increase in profit for the first quarter, driven mostly by increase in search and advertising revenues. However, both earnings and revenues for the quarter fell shy of Wall Street analysts' estimates

Also after the Wall Street close on Thursday, Microsoft said it closed its fiscal third quarter with earnings of USD3.76 billion, a drop from USD4.98 billion for the same quarter a year before. The results, which fell short of analyst expectations, came despite progress toward Microsoft's restructuring goals, which hope to trade its PC business for profits from the cloud. Microsoft shares were down 4.7% in premarket trade.

Notable US earnings due before the Wall Street open on Friday include results from McDonald's, General Electric, Caterpillar and American Airlines.

In London, housebuilders were amongst the best performers in the FTSE 100 and FTSE 250 after a positive note from Liberum. The investment bank noted the decline in UK housebuilders shares as the Brexit referendum approaches, but upgraded several stocks in the sector as it doesn't see much more downside risk following the share underperformance

Persimmon and Barratt Developments were the best performers in the blue-chip index, up 2.0%. In the FTSE 250, Redrow was up 2.5% and Bellway up 2.3%.

J Sainsbury's shares added 1.6% after Deutsche Bank upgraded the supermarket to Buy from Hold on the potential earnings generated from Sainsbury's acquisition of Home Retail Group. The bank said the market is overlooking this earnings accretion due to execution risks.

Melrose Industries was down 3.7%, after Numis downgraded the manufacturing business buyer to Hold from Buy, saying investor appetite for more capital returns from Melrose Industries has meant the stock now trades at a 20% premium to Numis's valuation.

Since the GBP3.3 billion sale of Melrose's Elster Group energy metering business and subsequent GBP2.4 billion return of capital to its shareholders in late December, the stock has risen 33%. Numis said this reflects investor appetite to participate in the next deal, but it doesn't want to chase the stock ahead of such a deal.

In the AIM All-Share index, African Potash was the worst performer, down 40%. The company said its supply agreement with Windmill has been terminated, but said it has signed a sales participation deal for potash with Safyr Commodities, which has, in turn, secured a sales agreement with Nyiombo Investments.

Safyr Commodities is a company jointly owned by the chairman of Beryl Holdings Pty, Neverl Kambasha, and financial services group Safyr Group. African Potash said the conditional sale agreements with Nyiombo, an importer and distributor of fertiliser, is for 50,000 metric tonnes of urea and NPK fertiliser.

In the rest of the economic calendar for the day, US Markit manufacturing PMI is due at 1445 BST, while the Baker Hughes US oil rig count is at 1800 BST.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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