Miners pull FTSE lower as traders spooked by fresnillo

Some of London’s biggest miners led the stock market lower on Wednesday after an update from gold and silver miner Fresnillo battered its shares.

The miner said that the tough Covid-19 situation in Mexico had delayed the opening of a vital plant, pushing its shares down 13%.

It also helped drag down Anglo American, Evraz and Glencore, which reports next week, by approximately 5% to 7% each.

It pushed London’s top index, the FTSE 100, of which all four are members, down by 1.3% by the end of the day.

The FTSE 100, which ended down 86.64 points at 6,567.37, dipped below its opening position on the first day of trading in 2021.

It wipes out the huge boost that the index had in its first week of trading this year, having gained on the post-brexit deal and news from the US where Democrats seized control of the Senate.

But on Wednesday a separate force was pushing some FTSE stocks higher, as traders looked across the Atlantic.

Over recent days, an attack on short sellers that was organised on forum site Reddit has sent shares in Gamestop up, and they added another 141% on Wednesday.

Short sellers are traders who bet that a company’s shares will drop. But if the price rises they lose out.

They had been betting against shares in the video games retailer. Earlier this month they were even “shorting’’ more shares than existed in Gamestop.

As shares in Gamestop rose further, Reddit users realised that the short sellers would soon need to cut their losses by buying shares in the company. The Redditors took advantage of this, buying stocks themselves and sending the share price soaring.

This had an impact on some UK companies, said CMC Markets analyst David Madden.

“Pearson shares are in high demand today even though there have been no news articles relating to the stock,’’ he said.

“Over in the US, Gamestop shares have seen a surge in volatility recently as there has been a raging battle between the short sellers and retailer traders. A large portion of Gamestop’s shares have been shorted, so that made the upward move much more pronounced.

“For a London-listed company, there is a relatively high level of short interest in Pearson, so it is possible that traders are snapping up its shares in a bid to pressure the short sellers.’’

In the US, the S&P 500 was trading down 1.9% when markets closed in Europe, and the Dow Jones had lost 1.5%. On the continent, the German Dax and French Cac were both in negative territory, having lost 1.6% and 1.2% respectively.