Previous session rally ends with wide-scale risk-stock sell-off

Recent merger and acquisition activity and the potential scrapping of the Australian supertax on miners have hit the backburner in today’s session as investors refocus on the slowing global economy. At 10:15BST the blue chip index is down 1.15 per cent with a loss of 60 points to fall back below the 5,200 bracket to 5,174.61.

Rob Hull
shareprices.com - Tuesday, August 24, 2010

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Miners are heading today's declines

The FTSE 100 plummet follows a similar story to markets overseas with Wall Street shedding points and Japan’s Nikkei hitting a new 15-month low at the close of the previous session, all on the back of global economy recovery fears.

Putting investors even more on edge are US home sale figures due later in the session and new figures for durable goods orders, consumer confidence and revised second quarter gross domestic product numbers from across the Atlantic.

The world’s largest builders merchant distributor, Wolseley (LON:WOS), is one of the main fallers on the FTSE this morning thanks to its strong ties in the United States and Irish building supplies firm CRH warning that core earnings would fall ten per cent, heightening fears of economic recovery. Wolseley shares are down in excess of five per cent as a result, dropping 67p.

But it’s a collective downturn of commodity stocks that are anchoring the UK’s top index today.

Mining and energy shares are down with commodity prices falling and concerns over demand returning to hamper any progress for share prices.

Vedanta Resources (LON:VED) is the lead culprit for the FTSE declines, haemorrhaging 5.8 per cent after India’s environment ministry rejected a proposal to mine bauxite in an eastern state which would have broken forest laws. Shareholders and potential investors in Vedanta are already showing concerns over the funding of the group’s staged £6.2bn bid for Cairn Energy’s (LON:CNE) Indian arm which is awaiting approval from India’s Oil and Natural Gas Corp.

Cairn Energy stocks are also in decline, but for a different factor. The share price is down 0.5 per cent after the company announced it had struck gas in Greenland, frustrating investors who were hoping for an oil find.

Other heavyweight miners heading the fallers charts this morning are Rio Tinto (LON:RIO) and Xstrata (LON:XTA).

The former is down 2.8 per cent after a Canadian newspaper linked the miner to a bid for Potash Corp, the Canadian fertiliser group that is currently fighting against a £25bn hostile takeover bid from BHP Billiton (LON:BLT). And BHP Billiton’s stock is struggling also, dropping over 1.5 per cent of the share price, with a members strike over wage demands at a joint venture project with Rio Tinto being voted on today.

Xstrata is also down at the same rate as Rio Tinto after it confirmed a takeover approach of Sphere Minerals.

And to conclude a difficult day of trading for risk-asserted stocks, banks are also in a wide-scale decline with Lloyds Banking Group (LON:LLOY) and Barclays (LON:BARC) 2.5 per cent down and Royal Bank of Scotland (LON:RBS) losing two per cent with global economy fears hounding the sector.

 

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