Home Stocks Resource stocks lead global equities lower as oil and metals fall

Resource stocks lead global equities lower as oil and metals fall

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Friday 09.55 GMT

What you need to know

  • Energy stocks track crude’s decline of around 3% for the week
  • Equities lower after Fed stays on course to tighten rates
  • Pound slips but holds $1.30 level after UK growth data
  • Dollar holds on to gains following Thursday’s rally

Hot topic

Resource stocks led global equities indices lower, tracking eye-catching falls for commodity prices from their recent peaks as investors also considered the outlook for rising interest rates in the US.

Sentiment was more cautious after the Federal Reserve sounded bullish on the US economy, leaving the way open for a rate rise as early as next month.

Oil and mining stocks were under the most pressure in Europe and Asia after a fall of around 3 per cent over the week for Brent crude, after news that supply from Iraq looked set to increase and after strong inventories data earlier in the week. Since its last peak in October, the international benchmark is down 19 per cent, and fell under $70 on Friday for the first time since April, down 1.2 per cent on the session at $69.78.

The Stoxx index tracking the oil sector was 1.2 per cent weaker, with the wider Stoxx 600 down 0.6 per cent. Oil majors were down more than 1 per cent across the board, with BP losing 1.3 per cent and Eni lower by 1.5 per cent.

Mining stocks were also falling, with the Stoxx index following metals producers down 2.7 per cent, with copper contracts on the London Metal Exchange down 4 per cent from their September peak. Glencore, the commodities trader and miner, was down 3 per cent.

London’s FTSE 100 fell 0.6 per cent, with Frankfurt’s Xetra Dax 30 weaker by 0.7 per cent, with steelmaker Thyssenkrupp down 11 per cent after it issued its second profit warning since July.

Early US futures pointed to a slip of 0.1 per cent for the S&P 500 after it eased 0.2 per cent amid expectations of a US rate rise next month.

The Federal Open Market Committee gave a bullish verdict on the US economy, noting that unemployment had dropped as growth in economic activity and household spending remained strong. Investment growth, the committee noted, had decelerated compared with earlier this year.

“Last night’s indication from the Federal Reserve that it intends to continue with its steady series of interest rate hikes will add to increasing concern that corporate earnings are peaking as the era of very cheap money, at least in dollars, appears to be fading away.”

Paul Markham, global equities portfolio manager at Newton Investment Management

Hong Kong’s Hang Seng was Asia’s worst performer, dropping 2.4 per cent overall, with technology stocks joining energy companies under pressure. Mainland China’s CSI 300 fell 1.4 per cent.

Tokyo’s Topix edged down 0.5 per cent.

Forex

The hawkish tone from the Federal Reserve left the dollar index up 0.7 per cent over two sessions, with a rise of 0.1 per cent for Friday extending Thursday’s advance.

The pound held on to the $1.30 level after UK growth data for September met forecasts. The main driver for the pound remained expectations that a Brexit deal would be reached between the UK and the EU. Sterling was down 0.4 per cent on the day at $1.3011, but 2.4 per cent above its October lows.

The euro was down 0.2 per cent at $1.340.

China’s renminbi was 0.2 per cent weaker at Rmb6.9458 to the dollar.

Commodities

US marker West Texas Intermediate was down 0.1 per cent at $60.66.

Gold was off 0.3 per cent at $1,219.36 per ounce.

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