Sliding commodity prices hit stock markets

LONDON: London’s stock market dropped yesterday, as sliding metals and oil prices hurt heavyweight mining and energy companies. Eurozone indices were down also despite fairly positive regional data.

Meanwhile growing confidence that the US will raise interest rates next month boosted the dollar, in turn hurting the euro which struck a seven-month low also on speculation of more stimulus from the European Central Bank (ECB). “After a very positive stretch for equity markets last week, a sharp fall in commodity prices has sent the UK market lower,” said Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor. “With oil and industrial metals prices all sharply down on fears of oversupply, reduced demand and a strengthening US dollar, the commodityheavy FTSE 100 has nowhere to hide. “At about 1100 GMT, London’s benchmark FTSE 100 index was down 0.6 percent. Frankfurt lost 0.3 percent and Paris shed 0.7 percent. It came as New York oil prices traded around the $40-a -barrel level. Nickel continued to plunge and gold declinedhelping push Bloomberg’s Commodity Index to a 16-year low. The declines weighed on mining and energy majors, with shares in global miner Anglo American down 2.1 percent and BP losing 1.4 percent.

Eurozone lift

Traders in Europe were reacting also to news that eurozone business activity hit a four-and-a-half year high in November, helping create much-needed jobs in a broad-based upturn despite the impact on France of the Paris attacks. Data monitoring company Markit said its closely watched Composite Purchasing Managers Index rose to 54.4 points from 53.9 points in October, putting it well above the 50-point boom-orbust line.

“While the ECB will undoubtedly take some encouragement and comfort from the improved eurozone purchasing managers’ surveys for November, they will unlikely deter the bank from delivering more stimulus in December especially as prices charged continued to fall,” said Howard Archer, chief economist on Europe at research group IHS Economics.

The euro stood at $1.0624 following the data, up from a seven-month low of $1.0601 struck during Asian trading hours yesterday. European Central Bank chief Mario Draghi on Friday hinted the lender could unleash further stimulus to boost stubbornly low inflation in the eurozone.

His pledge to “do what we must” to lift prices fuelled expectations the bank could expand its already vast easing scheme next month, dragging the single currency to its lowest point since mid-April.

Draghi’s remarks contrasted sharply with comments from San Francisco Fed president John Williams over the weekend, who said there was a “strong case” for an increase in December. US stocks capped their best week this year on Friday as investors digested growing signs that the Federal Reserve thinks the world’s top economy is strong enough to handle a rate rise next month.

The prospect of the first increase for almost a decade is boosting the greenback, but dragging down raw materials and energy shares as the stronger dollar makes them more expensive for international investors. Asian stock markets mostly rose yesterday following Wall Street’s strong gains last week and the chief European central banker’s comment that the ECB will consider more stimulus.

Hong Kong’s Hang Seng was little changed at 22,748.63 while Seoul’s Kospi gained 0.8 percent to 2,004.80. The Shanghai Composite Index added 0.4 percent to 3,644.70 and Australia’s S&P/ASX 200 advanced 0.4 percent to 5,276.40. Japanese markets were closed for a holiday. Markets rose in Taiwan, Thailand, Indonesia and the Philippines while Singapore fell. — Agencies