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London markets finish sharply lower after Bank of England slashes UK economy growth forecast

Published: 23:08 11 Aug 2010 BST

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London listed equities took a bit of a hammering today, with the leading FTSE 100 index plummeting 2% after bearish statements from governor of the Bank of England Mervyn King, who said the recovery would be "choppy," which triggered a sell-off in the markets. The Bank of England slashed its growth forecasts for the UK economy in 2011 to 2.5% from 3.4%.


The poor start in London wasn’t helped by a sharp drop in US equities at the start. The Dow Jones Industrial Average declined 2%, the broader S&P 500 index slipped 2.4% and the technology heavy NASDAQ composite tumbled 2.8%.


Tour operator TUI Travel (LON:TT) was the heaviest faller with a 6.4% decline, while Part-nationalized bank Lloyds (LON:LLOY) and telecommunications group BT (LON:BT.A) each lost 5.5%. Hedge fund manager Man Group (LON:EMG) and engineering firm Inmarsat (LON:ISAT) dropped 4.5%, as did another telecommunications company Cable & Wireless Worldwide (LON:CW).


Commodities


Oil prices extended losses despite bullish inventories data as the selloff in equity markets continued after China reported a rise in its CPI (consumer prices index) to 3.3% from 2.9%, eclipsing its full year target of 3%.


Growth in CPI could prompt the Chinese government to introduce yet more monetary policy tightening measures to curb inflation and prevent the economy from overheating, thus cutting its energy demand. China is the world’s second largest energy consumer behind only the US.


On Monday, China said its crude imports fell 3.1% to 4.5 million barrels a day in July.


Blue chip oil and gas producers were in decline today. Supermajors BP (LON:BP, NYSE:BP) and Shell (LON:RDSB, NYSE:RDSB) shed 1.6% and 2.2% respectively.


Oil and gas engineering firms Amec (LON:AMEC) and Petrofac (LON:PFC) lost nearly 2%.


Confusion surrounded Heritage Oil (LON:HOIL) today after Uganda’s energy minister said the company’s asset sale to Tullow Oil was incomplete until it paid US$405 million in capital gains taxes.


Gold rises above $1,200


Gold managed to recapture the US$1,200/oz level as safe haven buying intensified amid another massive sell off in equity markets in Europe and the US.


Gold climbed to US$1,206/oz, but silver and platinum retreated to US$18.08/oz and US$1,535/oz respectively.


Major mining stocks were in decline today. Gold miner Randgold Resources (LON:RRS) was an exception, climbing 1.7%. Silver miner Fresnillo (LON:FRES) and platinum miner Lonmin (LON:LMI) lost more than 2.5%. African Barrick Gold (LON:ABG) declined marginally.


Miners fall as base metals decline


Copper and nickel declined to US$3.26/lb and US$9.78/lb, while zinc retreated to US$0.99/lb.


Base metal miners declined. Kazakhmys (LON:KAZ) and Vedanta Resources (LON:VED) were at the bottom of the pile with losses of over 4%. Anglo American (LON:AAL), Rio Tinto (LON:RIO) and Xstrata (LON:XTA) declined 3.5%.

BHP Billiton (LON:BLT) and Antofagasta (LON:ANTO) retreated 2.5% and 2% respectively

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