LONDON MARKET MIDDAY: Miners, Drug Makers And VW Drive FTSE 100 Lower

LONDON (Alliance News) - UK shares were lower Tuesday midday, with commodity-related and pharmaceutical stocks the leading blue-chip fallers.

Only one FTSE 100 stock was in the green Tuesday, RSA Insurance, rebounding 1.5% after having lost 21% on Monday after Zurich Insurance pulled out of takeover talks.

The FTSE 100 was down 1.9% at 5,994,67, trading below the 6,000 line for the first time in nearly a month. The FTSE 250 index was off 1.5% at 16,640.03, and the AIM All-Share was down 0.9% at 732.97. In Europe, the CAC 40 index in Paris was down 3.0% and the DAX 30 in Frankfurt was declining 2.7%.

Stocks in Asia closed higher, with the Hang Seng index up 0.2% and the Shanghai Composite up 0.9%. The Japanese market remains closed for holiday until Thursday.

Wall Street was called for a negative open, as analysts expect global growth concerns and uncertainty over US interest rates to continue to weigh on investor confidence. US stock futures were pointed down, with the Dow 30 index seen down 1.5%, the S&P 500 off 1.6% and the Nasdaq 100 called down 1.9%.

Ahead in the US economic calendar, there is the US Redbook index at 1355 BST just before the housing price index at 1400 BST.

Oanda analyst Craig Erlam said that the absence of economic data isn't helping to lift risk appetite in the market, "with investors needing some form of positive catalyst to lift the mood".

"Ordinarily, the prospect of US interest rates staying lower for longer could have prompted such a positive response, but such is the environment we currently find ourselves in, investors instead focused on the downbeat growth and inflation forecasts and emerging markets risks," Erlam said.

In London, miners were amongst the worst performers in the blue-chip index after downgrades from Credit Suisse and lower commodity prices.

Antofagasta was down 7.1% after the bank cut it to Underperform from Neutral, while Anglo American was down 6.8% after being cut to Neutral from Outperform. Others such as Glencore, down 8.8%, BHP Billiton, down 4.5%, and Rio Tinto, down 4.1%, also were among the biggest fallers.

Head of Research at Accendo Markets Mike van Dulken said that the strength of the dollar following Thursday's US Federal Reserve decision to keep US interest rates on hold was hurting the price of commodities. As a result, gold prices retreated Tuesday to USD1,130.50, while silver also was taking a step back to USD14.98.

Other commodities such as oil were being sold as well. Brent oil prices were down at USD48.10 a barrel, coming off the level of USD50.31 prior to the Fed decision, while West Texas Intermediate was at USD45.93 a barrel, having traded at USD47.68 before the Fed announcement.

Consequently, oil-related stocks also were in the red, with BP down 2.8%, Royal Dutch Shell 'B' share down 2.6% and BG Group down 2.4%.

The pound was lower against the dollar Tuesday, standing at USD1.5442, having traded at USD1.5558 before the Fed decision on Thursday.

Pharmaceutical companies were out of favour, with Shire down 4.0%, AstraZeneca down 3.5% and GlaxoSmithKline down 3.0%, after US presidential candidate Hillary Clinton tweeted about "price gouging" in the specialty drug market.

On her official twitter account Monday, Clinton cited a New York Times article which said the price of the Daraprim drug, which treats a life-threatening parasitic infection, soared to USD750 a tablet from USD13.50 a tablet overnight.

Clinton, the frontrunner for the Democratic nomination, tweeted "price gouging like this in the specialty drug market is outrageous. Tomorrow I'll lay out a plan to take it on".

Meanwhile, analysts at UBS suggested that GKN, down 5.1%, could be retreating as shares in Volkswagen crashed again on Tuesday amid an emissions cheating scandal. Volkswagen is GKN's largest customer in its Driveline business.

The German carmaker issued a third-quarter profit warning and admitted that emissions tests for about 11 million cars around the world may have been manipulated. Europe's biggest carmaker said it is setting aside EUR6.5 billion to cover costs of the investigation into how software was used to cheat emissions tests.

Meanwhile, J Sainsbury, down 0.4%, jumped briefly into the green before giving back its gains, after Kantar Worldpanel's grocery market survey said that it was the only big four UK supermarket to increase sales in the past 12 weeks, for the second consecutive period.

Sainsbury's sales rose 0.9% in the 12 weeks to September 13 to GBP4.01 billion from GBP3.97 billion in the same period a year earlier, as its market share stayed flat at 16.2%.

Shares were down among Sainburys' blue-chip peers, whose sales Kantar said were lower, with Wm Morrison Supermarkets down 1.6% and Tesco off 1.4%.

In the FTSE 250, IG Group Holdings was the best performer, up 2.7% after it said its revenue increased substantially in the first quarter against a weak comparative, but said the volatile market conditions make it difficult to predict an outcome for the full year.

The spread betting and contracts-for-difference company, which gives retail traders access to financial markets, said it is trading in line with its expectations at present, with revenue in the first quarter to the end of August up 24% to GBP106.0 million, though it noted the same period last year was "particularly subdued".

By Daniel Ruiz; danielruiz@alliancenews.com

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