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LONDON (Alliance News) - Stocks in London were lower Tuesday midday, with commodity-related stocks as the main drag, tracking weak trading for Asian stocks after Bank of Japan left monetary policy unchanged and oil prices slumped once again.

"This morning has seen Asian worries and commodity weakness rub off upon its European counterparts. This has provided an element of doubt amid the widespread buying that has personified European stock markets since last week's post-ECB sell-off," said IG analyst Joshua Mahony.

The Bank of Japan refrained from expanding its monetary stimulus as policymakers wait to see the impact of the negative interest rate which it set in January.

Governor Haruhiko Kuroda and his board members decided by an 8-1 majority vote to hold the BOJ's target of raising the monetary base at an annual pace of about JPY80 trillion. Policymakers voted 7-2 to maintain the -0.1% interest rate on current accounts that financial institutions maintain at the bank.

The Japanese central bank had introduced negative interest rate in January in order to achieve its 2% inflation at the earliest possible time. It said it would take additional easing measures if needed for achieving the price stability target.

Currency analysts at Commerzbank said the Bank of Japan should have gone much further with its easing measures and is being punished by the market as the Japanese yen rose against the dollar.

"The BoJ does not have the guts to grab the bull by the horns and to step up its measures right away so as to show the world that it really is totally determined to use all means in its fight for inflation," Commerzbank said.

The Nikkei 225 index in Tokyo closed down 0.7%, while in China the Shanghai Composite ended up 0.2% and the Hang Seng in Hong Kong fell 0.7%.

Societe Generale analyst Kit Juckes said the BOJ decision was a catalyst for the risk aversion seen in the market, but the analyst noted "the fact that the oil bounce ran out of steam could be blamed just as much".

Brent crude was quoted at USD38.53 a barrel at midday. The North Sea benchmark added to the declines seen on Monday, when it went below the USD40 line, standing at USD39.11 a barrel at the London equities close. Brent's highest level since it touched multi-year lows around the USD27 line has been the USD41.45 a barrel level reached earlier in March.

The oil price declined Monday after the Organization of the Petroleum Exporting Countries said it now expects lower demand for its crude oil in 2016 than previously anticipated. In its monthly report, OPEC said demand for its crude oil is projected at 31.5 million barrels per day in 2016, down by about 100,000 barrels per day from what it had forecast in its last report.

The FTSE 100 was down 0.6%, or 38.54 points, at 6,136.03, with oil-related and mining stocks firmly in the red, pushing down the blue-chip index.

Royal Dutch Shell 'A' shares were down 1.1%, while BP was off 1.3%. But it was miners at the bottom of the FTSE 100, with Antofagasta was down 10%, Anglo American down 7.3%, BHP Billiton down 5.9%, Glencore down 5.0% and Rio Tinto down 4.1%.

IG's Joshua Mahony said the "blockbuster recovery" across the commodity sector is showing signs of weakness, and the analyst said "there is a feeling" the traders who had supported the upward bounce for mining stocks will take their profit in the hope of a better entry point after the decline.

Antofagasta was the biggest faller in the FTSE 100 after it skipped its final dividend and reported much lower earnings. The Chilean copper miner reported net earnings from continuing operations of only USD5.5 million in 2015, a dramatic fall from the USD422.4 million reported in 2014, as revenue dropped 34% to USD3.39 billion as a result of weaker copper prices and lower production.

Pretax profit followed suit, falling to USD259.4 million from USD1.51 billion the year earlier. As a result, Antofagasta said it will not pay a final dividend for the year, leaving shareholders with the 3.1 pence interim dividend paid for the first half. That is a huge drop from the 21.5 cents full-year dividend paid in 2014.

Antofagasta was cut to Underperform from Neutral by Macquarie, while the broker also downgraded BHP to Underperform from Neutral. Morgan Stanley cut Rio Tinto to Equalweight from Overweight, while it downgraded Anglo American to Underweight.

Also in the red was Legal & General, down 6.0%. The life insurer and investment manager said profit and cash generation improved in 2015, prompting a higher dividend, though future increases in the payment to shareholders will be more strongly informed by underlying business growth.

Pretax profit rose to GBP1.36 billion in 2015 from GBP1.24 billion in 2014, slightly ahead of company-supplied analyst consensus of GBP1.34 billion. Net cash generation grew by 14% to GBP1.26 billion, ahead of the GBP1.22 billion expected by analysts. Legal & General lifted its total dividend per share for the year to 13.40 pence from 11.25p in 2014, beating the 13.34p expected by analysts, and it committed to a "progressive" dividend policy.

At the other end of the index, Royal Bank of Scotland was the best blue-chip performer, up 1.4%, after Goldman Sachs added the lender to its Conviction Buy list, having previously had it at Neutral.

The FTSE 250 was down 0.2% at 16,655.77 and the AIM All-Share was down 0.1% at 712.50 points.

Mid-cap insurer Hastings Group Holdings was up 4.8%. The group declared its first dividend since listing as operating profit rose to GBP126.1 million in 2015, up from GBP103.5 million in 2014, and net earned premiums increased to GBP255.9 million from GBP199.1 million. Pretax profit, which took into account amortisation and depreciation of GBP27.6 million and finance costs of GBP91.1 million, amounted to GBP5.0 million in 2015, versus a pretax loss of GBP1.4 million in 2014. Hastings declared a dividend of 2.2 pence per share.

Online grocery delivery firm Ocado Group was another riser, up 2.8%. The company reported growth in sales in the first quarter of its financial year, boosted by a rise in average orders per week and said it expects to continue growing ahead of the online grocery market. Sales in the 12 weeks to February 21 grew to GBP312.4 million from GBP271.1 million in the same period in 2015, as retail sales rose to GBP286.7 million from GBP252.0 million. Average orders per week increased to 214,000 from 183,000, but the average order size slipped to GBP111.41 from GBP114.72.

Meanwhile, shares in Inchcape were up 2.3%. The car distributor said its pretax profit and revenue both edged up in 2015, driven by a robust performance in its emerging markets business. The company said pretax profit rose 2.7% to GBP262.6 million from GBP255.8 million in 2014, as revenue inched up to GBP6.8 billion from GBP6.7 billion.

Inchcape will pay a final dividend of 14.1 pence per share, up from 13.8p a year earlier, taking its total dividend to 20.9p, a 4.0% rise on its 20.1p payout in 2014.

Shares in Russian steelmaker and miner Evraz were down 3.1%. The group said its loss narrowed in 2015 despite revenue falling and said it has made a series of cuts to its capital expenditure and operating costs to try to cushion the blow of lower commodity prices and demand.

Evraz said its pretax loss amounted to USD707.0 million in 2015, which is considerably narrower than the USD1.08 billion loss booked in 2014, despite revenue falling to USD8.55 billion from USD12.74 billion. Evraz slashed spending and costs in the year, with capital expenditure down 35% to USD428.0 million in 2015 from USD654.0 million a year earlier. The group said it also made USD374.0 million in operating cost savings in the year.

Europe's main indices were also lower, with the CAC 40 in Paris and the DAX 30 in Frankfurt down 0.9% and 0.5%, respectively.

Stocks in New York were called to follow Europe and Asia down, with the DJIA and the Nasdaq 100 both seen down 0.4% and the S&P 500 pointed down 0.6%.

The US Federal Reserve begins its two-day policy meeting later Tuesday, before it announces its policy decision on Wednesday at 1800 GMT. Also in the US economic calendar, the New York State manufacturing index is at 1230 GMT, as are US retail sales and producer price index. US business inventories and the National Association of Home Builders' housing markets index are both at 1400 GMT.

By Daniel Ruiz; danielruiz@alliancenews.com

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