Britain’s top share index fell to a two-month low on Tuesday, extending the previous day’s losses, as a decline in oil and metal prices after disappointing Chinese data hit commodities shares.
Brent crude oil fell below $60 for the first time since July 2009 and copper prices reached a one-week low following a Chinese report that factory activity shrank in December for the first time in seven months.
The flash HSBC/Markit manufacturing purchasing managers’ index fell to 49.5 in December, below the 50.0 forecast by analysts and below November’s final reading of 50.0.
The UK mining index fell 1.4 per cent to its lowest in more than five years after slumping 2.9 per cent on Monday. The oil and gas index dropped 0.8 per cent to a 4 1/2-year low after slipping 2.5 per cent in the previous session.
“Volatility is likely to continue in the short-term as the full effects of a lower oil price ripple through financial markets,’’ said Laith Khalaf, a senior analyst at Hargreaves Lansdown.
“While there are positives to draw from a lower price, these are perhaps further away and less tangible than the obvious negative impact on oil-related stocks.’’
Oil majors BP, BG Group and Tullow Oil were down 1.1 to 2.0 per cent. Global mining companies Rio Tinto , Randgold Resources and BHP Billiton fell 0.3 to 3.3 per cent.
FTSE 100 index
Lower commodity stocks put pressure on the FTSE 100 index, which was down 0.4 percent at 6,156.79 points by 0858 GMT after falling to a low of 6,144.72, the lowest since mid-October. The index dropped 1.9 per cent on Monday and closed at its lowest in nearly 18 months.
Bank shares
Banking shares, which opened higher after the results of the Bank of England’s stress test on banks, also gave up gains in line with the broader market sell-off. They still outperformed the FTSE 100 index.
The central bank said Britain’s main banks would be able to withstand a sharp fall in house prices, other than the troubled Co-operative Bank. State-backed RBS and Lloyds scraped through the test after both took pre-emptive measures to shore up their capital defences.
The UK banking index was down 0.2 per cent, with Barclays trading flat, Lloyds up 0.3 per cent, RBS down 0.1 per cent and HSBC down 0.4 per cent.