LONDON MARKET CLOSE: Flood Of Commodities Selling Drowns Shares

LONDON (Alliance News) - London stock prices gave up midday gains Friday to close the day lower, after finally giving in to the pressure its heavily-weighted resource sector is feeling from the continued global sell-off in commodities.

The large-cap FTSE 100 index ended down 1.1% at 6,579.81, its fourth successive losing session, shedding 2.9% over the course of the week as a whole. The mid-cap FTSE 250 closed down 0.7% at 17,499.11, and the AIM All-Share closed down 0.2% at 754.92.

The CAC 40 in Paris ended down 0.6%, while the DAX 30 in Frankfurt lost 1.4%. On Wall Street at the close of European equity markets the Dow 30 and S&P 500 were both down 0.4%, and the Nasdaq Composite was down 0.1%. The tech-heavy index was supported by Amazon.com, up 16% after revealing a surprise second-quarter profit late Thursday.

The FTSE 100 felt the crunch all week from the slide in commodity prices, as resource stocks hold a particularly heavy weighting in London's blue-chip index. Commodities have seen heavy selling as expectations of a US Federal Reserve rate hike support the dollar and also amid concerns about global demand and a supply glut.

Commodities prices were weakened further Friday by disappointing economic data from China. Activity in China's vast manufacturing sector slumped to a 15-month low in July, a preliminary private survey showed in a fresh sign of deterioration in the world's second largest economy. The flash Caixin/Markit purchasing managers' index fell to 48.2 from a final reading of 49.4 in June as shrinking orders depressed output. It was the fifth straight month below 50, the level that separates expansion from contraction.

Gold had a particularly torrid week. Last weekend the precious metal crashed to a new five-year low of USD1,073.40 an ounce. After a brief recovery early in the week, gold fell back to a low of USD1,077.10 on Friday.

Miners dominated FTSE 100 fallers, led by Rio Tinto, down 3.4%, having hit a nearly six-year low. BHP Billiton ended down 2.7%, also touching a new six-year low, and Glencore, which listed in 2011, closed down 2.5%, having hit a new record low.

The FTSE 350 mining sector index fell to a fresh six-year low closing down 3.8%.

Anglo American ended up 0.2%, having risen and fallen throughout trading, including touching a fresh 13-year low. The multi-commodity miner said Friday it swung to a pretax loss in the first half of 2015 after recording a substantial USD3.5 billion impairment, driven by the fall in commodity prices, and said it is aiming to cut 35% of its workforce as part of its cost-saving initiative.

The miner reported a USD1.9 billion pretax loss in the six months ended June 30, swinging from a USD2.94 billion profit a year earlier, as revenue tanked 17% to USD13.34 billion from USD16.14 billion due to falling commodity prices.

Fellow-miner Lonmin also announced job cuts as it plans to close or temporarily shut down numerous mine shafts in South Africa, leading to production being around 100,000 platinum ounces less per year over the next two years.

It said it was taking the "necessary protective measures" to reduce its cost base in the current pricing environment so that it will be able to sustain a viable operation even if current weak metal prices continue for some time, it said.

Lonmin closed as the worst performer in the FTSE 250, down 17%.

Oil prices also fell, with Brent oil dropping to its lowest level in three months. Brent hit a low of USD54.38 a barrel, while West Texas Intermediate fell to USD47.94 a barrel, a nearly four-month low. Oil majors BP and Royal Dutch Shell closed lower, with BP ending down 1.6%, Shell 'A' shares also closing down 1.6%, and Shell 'B' shares ending down 0.7%.

Vodafone Group led the handful of FTSE 100 gainers, up 3.4%. The mobile telecommunications giant confirmed its guidance for its current financial year, as it said revenue fell 0.9% on a reported basis in its first quarter but said it saw an improving trend in its organic service revenue in what it called a "good start to the year".

Vodafone posted group revenue of GBP10.11 billion for the quarter to end-June, down from GBP10.20 billion a year before. Its closely-watched service revenue fell to GBP9.17 billion, down from GBP9.45 billion a year before, though this was slightly ahead of consensus analyst expectations of GBP9.15 billion. It said that, on an organic basis, service revenue rose 0.8% in the quarter.

Vodafone attributed the decline in revenue to a 7.3 percentage point hit from foreign exchange movements, which offset a 3.1 percentage point boost from merger and acquisition activity. On an organic level, excluding mergers and acquisitions and at constant currency, revenue rose 3.3%.

In the FTSE 250, shares in former FTSE 100 constituent Aggreko closed down 12%. The temporary power provider said it now expects its 2015 interim and full year results to fall short of current market expectations, citing a further slowdown in its North American oil and gas related business and "ongoing security challenges" in Yemen.

Aggreko said it expects to post a full-year pretax profit for 2015 of between GBP250 million and GBP270 million at current exchange rates. That compares to previous City consensus estimates of GBP292.4 million, according to Morningstar.

Beazley ended as the best performer in the FTSE 250, up 6.4%. The specialist insurer posted a higher pretax profit for the first half of 2015 on the back of a better return on equity and higher gross written premiums in the period. It said its pretax profit was USD154.5 million for the six months to the end of June, up from USD132.9 million a year earlier. The company said its return on equity in the half improved to 20%, compared to 17% a year ago.

In the economic calendar Monday there are CESifo Group business sentiment survey results from Germany at 0900 BST and eurozone money supply data at the same time. In the afternoon, there are US durable goods orders at 1330 BST.

In the corporate calendar, there are half-year results from Reckitt Benckiser, Hiscox, Acacia Mining, Senior and Dialight. Cranswick issues a first-quarter interim management statement.

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

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