(Alliance News) - Stocks in London ended sharply lower on Thursday amid a drop in commodity prices, fears about global growth prospects and after the US Federal Reserve indicated a winding down of its substantial emergency stimulus.
US central bankers expect to start pulling back on stimulus measures this year, if the economic recovery continues, according to the minutes of the July policy meeting released Wednesday.
While the discussions showed some division among rate-setters on the prospects for inflation and employment, with few exceptions they see a slowdown in the massive asset purchases in coming months.
The FTSE 100 index closed down 110.46 points, or 1.5%, at 7,058.86. The mid-cap FTSE 250 index closed down 229.50 points, or 1.0%, at 23,606.87. The AIM All-Share index ended down 5.60 points, or 0.4%, at 1,260.75.
The Cboe UK 100 index ended down 1.6% at 701.50. The Cboe 250 lost 0.9% at 21,473.80, and the Cboe Small Companies closed 1.1% lower at 15,308.50.
In Paris the CAC 40 ended down 2.4%, while the DAX 30 in Frankfurt ended down 1.3%.
"It looks like the market is responding two to major bearish catalysts. Commodities were already getting crushed on concerns the recovery was slowing down in both the US and China (the world's largest economies), after a handful of disappointing macro numbers. Adding to those worries were uncertainty over Covid, as well as concerns over valuations and inflation. Then, investors were reminded about tapering after the FOMC's last meeting minutes revealed Fed officials agreed they could start slowing the pace of bond purchases later this year," said ThinkMarkets analyst Fawad Razaqzada.
In the FTSE 100, precious metals miners Polymetal International and Fresnillo ended among a handful of stocks in the green, up 1.6% and 0.6% respectively, amid the risk-off sentiment across the board.
Gold was quoted at USD1,781.65 an ounce at the London equities close, firm against USD1,779.25 late Wednesday.
Weir Group ended up 0.2% after JPMorgan raised the pumps and valves maker to Overweight from Neutral.
At the other end of the large-caps, Anglo American ended the worst performer down 10%, while Abrdn, Phoenix and M&G ended down 4.3%, 5.2% and 5.3% respectively. The stocks went ex-dividend meaning new buyers no longer qualify for the latest payout.
Anglo's drop was also part of a wider decline in the mining sector. Rio Tinto, Glencore, Evraz and BHP lost 2.7%, 3.5%, 3.5% and 2.5%, respectively.
"Mining stocks have fallen into a hole, along with iron ore and copper prices, as Anglo American, Antofagasta, BHP and Rio Tinto all fall back sharply, as Chinese cuts to steel production announced earlier this month hit demand, as well as consumption for iron ore," explained CMC Markets analyst Michael Hewson.
"Prices of iron ore hit their lowest levels this year, only three months after they hit all-time highs in May, while oil prices have also hit three month lows, on concerns over lower demand as tighter covid restrictions heighten worries over economic slowdowns," Hewson added.
Oil majors BP closed down 4.9%, while Royal Dutch Shell 'A' and 'B' shares both ended 3.9% lower, tracking spot oil prices lower.
Brent oil was quoted at USD66.10 a barrel at the equities close, down sharply from USD68.75 at the close Wednesday. The North Sea benchmark fell to an intraday low of USD65.57 in afternoon trade - its lowest level since May.
"Oil prices are among those risk assets suffering heavy losses today, with Brent and WTI... at their lowest levels in three months. The sell-off in oil was already well underway, with the spread of Covid in China - and elsewhere - and restrictions that have come with it largely behind the reversal in fortune," explained Oanda Markets analyst Craig Erlam.
Burberry Group finished 6.6% lower due to ongoing concerns over wealth redistribution in one of the luxury goods retailer's largest markets, China.
The pound was quoted at USD1.3666 at the London equities close, sharply lower from USD1.3750 at the close Wednesday.
The euro stood at USD1.1685 at the European equities close, down from USD1.1705 late Wednesday. Against the yen, the dollar was trading at JPY109.75, lower against JPY109.92 late Wednesday.
Stocks in New York were mixed at the London equities close amid lingering global growth worries, though weekly US jobless claims fell to a new pandemic low.
The DJIA was down 0.4%, the S&P 500 index flat and the Nasdaq Composite up 0.1%.
US jobless claims fell sharply last week, beating market consensus, data from the Department of Labor showed on Thursday.
Initial jobless claims for the week ending August 14 totalled 348,000, down from 377,000 in the previous week, which was revised slightly higher. The latest figure came in well below market forecasts. Market consensus, cited by FXStreet, had predicted 363,000 jobless claims for this week.
The economic events calendar on Friday has Japan inflation readings overnight and UK retail sales numbers and Germany producer prices, both at 0700 BST.
The UK corporate calendar on Friday has interim results from Irish building materials firm Kingspan Group.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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