FTSE lower as mining stocks slide

Mining and banking stocks pulled the FTSE 100 Index into the red despite strong gains for microchip designer ARM and Marks & Spencer.

The London market closed 24.4 points lower at 6019.5 in a reversal of earlier gains that had seen it hit a new 30-month high. The Dow Jones Industrial Average on Wall Street also sank into negative territory amid caution ahead of Friday’s keenly-watched US jobless claims figures.

Joshua Raymond, market Strategist at City Index, said many were looking to take profits off the table after a recent strong run. He said: “The FTSE 100 gave up its day’s gains after a poor afternoon session saw investors sell out of heavyweight commodity stocks citing a rising US dollar pressurising metal and crude prices.

“Much of the dollar’s strength and subsequent FTSE weakness was triggered in part by traders locking in profits and reducing positions in risky asset classes ahead of Friday’s all important jobs data.”

Silver miner Fresnillo sank to the bottom of the index, losing 89p to 1578p, while Lonmin was not far behind, shedding 30p at 1910p. Banks such as Royal Bank of Scotland and Lloyds were also down, falling 0.4p to 40.4p and 1.2p to 67.2p respectively.

The pound dropped back after Services PMI for December slowed for the first time in 20 months showing a surprise contraction to 49.7, suggesting fourth-quarter GDP growth could be slightly below expectations. Sterling was down against the US dollar at 1.54.

Fears for the retail sector were compounded after FTSE 250 firm Mothercare issued a surprise profits warning following the pre-Christmas snow. The stock slumped 5% – down 33p to 565p – as it joined Next, HMV and Clinton Cards in highlighting the impact of December’s snow.

Cambridge-based technology firm ARM was one of the day’s biggest risers after computing giant Microsoft confirmed it would run the latest version of its flagship Windows software on the company’s microchips. The deal is a coup for ARM, analysts said, and will allow both companies to push into the high-end tablet market, which includes products such as Apple’s iPad. The stock jumped to a 10-year-high earlier in the session before closing up 2% or 10.6p to 482p.

Rolls-Royce was another riser, up 5p to 659p, after it completed contracts for Trent 900 and Trent 1000 engines to power up to 61 new wide-body aircraft with British Airways. The deal will appease investors shaken by safety fears about the Trent 900 after the explosion which forced Australian carrier Qantas to ground its fleet of A380 superjumbos.

BA also moved higher, up 12.6p to 300.2p, in spite of news that it expects the snow disruption to cost it around £50 million in the third quarter.