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LONDON (Alliance News) - UK shares led a global equity slump Wednesday, as the London market's heavy weighting in mining companies counted against it as copper prices dropped to five-year lows.

Concerns about global economic growth were heightened first when the World Bank cut its growth forecasts for 2015, and later when US retail sales were reported to have declined by more than expected in December.

The FTSE 100 closed down 2.4% at 6,388.46, the FTSE 250 down 1.3% at 15,872.09, and the AIM All-Share index off 0.7% to 697.40. It was the worst day for the FTSE 100 since December 12.

European equity indices, with fewer resources listing, suffered less than London but still ended heavily down. The CAC 40 in Paris lost 1.6%, and the DAX 30 in Frankfurt 1.3%.

European indices also gained some support after an advisor to the European Court of Justice gave a positive assessment of the European Central Bank's so-called Outright Monetary Transactions programme, which forms the basis of its government-bond plans. The opinion gives a green light to ECB President Mario Draghi to launch a government bond-buying programme aimed at spurring economic growth and heading off deflation, possibly as early as next week when the ECB policy-making council meets for the first time this year.

The euro fell to a nine-year low against the dollar on the back of the announcement, but recovered during the remainder of the trading session. At its lowest point Wednesday the euro traded the greenback at USD1.1726, which is also below the currency's 1999 launch rate.

The World Bank had earlier raised concerns about the health of the world economy after it cut its global growth forecast. In its bi-annual report, the Washington-based development institution predicted global growth of 3.0% in 2015, up from 2.6% last year, but down from its earlier 2015 forecast of 3.4%, saying a strengthening US economy and plummeting oil prices won't be enough to offset disappointing economic prospects in the eurozone, Japan and some major emerging markets.

Commodity-related stocks were amongst the biggest fallers in the FTSE 100 and FTSE 250 following the fall in copper prices and concerns about global growth.

Glencore was the biggest FTSE 100 faller, closing down 10%. Anglo American ended down 9.0%, BHP Billiton down 5.3%, Antofagasta down 4.8%, and Rio Tinto down 4.7%.

In the FTSE 250, KAZ Minerals closed down 26%, the second biggest faller in the index, while Vedanta Resources ended down 16% and Blackrock World Mining Trust fell 5.2%.

The FTSE 350 Mining sector index was the worst performing sector, ending down 6.2%.

"Copper can be a good leading indicator for the global economy because it is widely used in construction and manufacturing processes. However there has been no clear reason to explain the recent sharp declines in its price, although news that the World Bank has trimmed its global demand forecasts has not helped it at all," said Fawad Razaqzada, technical analyst at FOREX.com. "The fact that copper prices were falling before this news came out may therefore suggest that growth could be even weaker in the next two years than the World Bank envisages."

Asian stocks had started the global market rout, with the Nikkei 225 in Tokyo closing down 1.7% and the Hang Seng in Hong Kong and Shanghai Composite both ending down 0.4%.

London stock indices were further undermined after the report that US retail sales declined by more than expected in December. According to the US Commerce Department, retail sales slumped by 0.9% month-on-month after a downwardly revised 0.4% rise in November. Economists had expected sales to edge down by 0.1% compared to the 0.7% increase originally reported for the previous month.

"What is worrying for a Federal Reserve seeking to raise interest rates is that cheap oil isn’t really making itself felt for the consumer, providing another condemnation of the fall in wage growth in the USA," said Connor Campbell, a financial analyst at Spreadex.

At the close of London equity markets, Wall Street was posting broad losses. The DJIA was down 1.4%, the S&P 500 was down 1.1%, and the Nasdaq Composite was down 0.7%.

Tesco, up 0.9%, was one of just seven FTSE 100 gainers Wednesday. The supermarket chain was raised to Outperform from Neutral by Exane BNP Paribas, with a price target increase to 250.00 pence from 180.00p. The stock closed trade at 214.00p.

Standard Chartered, down 4.9%, was another of the heavy blue-chip fallers. UBS downgraded the Asia-focused bank to Neutral from Buy, saying it is caught in a "capital trap". The Swiss bank also trimmed its price target to 980.00 pence from 1,120.00p. Standard Chartered closed the day at 886.10p.

GAME Digital led the FTSE 250 fallers, closing down 31%. The video game retailer said after the close of the London equity market Tuesday that due to lower-than-expected margins on its hardware sales, it expects its full-year earnings before interest, tax, depreciation and amortisation to be broadly in line with its previous year's figure of GBP51.3 million. The company said that whilst it saw hardware volume sales up 25% over the Christmas trading period, the eleven weeks to January 10, group sales fell 5.4% at constant currency due to lower selling prices and margins.

SuperGroup was the best performing mid-cap stock by some distance, ending up 10%. The owner of the clothing brand SuperDry said it saw a "strong performance" over the peak Christmas trading period, and is comfortable with delivering a profit for the year in the region of GBP60 million to GBP65 million.

In a surprise trading update, the company said total retail sales for the 11 weeks to January 10 rose just short of 18%, while on a like-for-like basis sales grew by more than 12%, which it said was against softer comparatives than the first half. The retailer also said it embarked on more discounting over Christmas than previous years, as it needed to clear some of the excess stock it built up during the Autumn months.

Just Eat, up 3.4% was also a strong performer in the FTSE 250. The online takeaway company said it is "highly confident" for its 2014 results, both financial and operational, after it saw a 50% increase in orders during the year. Just Eat said total orders in 2014 increased 52% year-on-year, boosted by the consolidation of orders from its French business in the second half of the year, although it said that excludes any Brazilian orders from November onwards when that business became an associate. On a like-for-like basis, it said orders were up 50%.

In the economic calendar Thursday, eurozone trade balances for November will be at 1000 GMT, US initial and continuing jobless claims will be at 1330 GMT alongside producer prices for December.

In the corporate calendar, Tullow Oil is expected to issue a trading statement, and Primark owner Associated British Foods will release a first-quarter interim management trading statement. Information services company Experian is due to release a third-quarter interim management statement, as will Homebase owner Home Retail Group and food wholesaler Booker Group. Housebuilder Bovis Homes is scheduled to release a trading statement and Mothercare will issue a third-quarter trading statement.

By Neil Thakrar; neilthakrar@alliancenews.com

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