FTSE 100 Index closes lower after drop in oil price hits commodity stocks
London's blue-chip index sank on Tuesday after commodity stocks took a battering following a sharp drop in the price of oil.
The FTSE 100 Index closed down 51.1 points at 7472.71, with the mining giants bearing the brunt of the sell-off as Brent crude slid 2.5% to 45.74 US dollars a barrel.
Chilean copper miner Antofagasta was the biggest faller on the London market - falling more than 4% or 37p to 755.5p - after rising oil output in Libya and Nigeria left traders fearing that Opec-led production cuts would have little impact on the global supply glut.
Glencore also took a hit, dropping 11.4p to 276.6p, while oil majors Royal Dutch Shell B and BP were off 49.5p to 2,125.5p and 12.4p to 460.3p respectively.
The oil price slump had shifted the top flight into a reverse following a morning rally triggered by dovish comments on UK interest rates by Bank of England Governor Mark Carney.
David Madden, market analyst at CMC Markets UK, said: "The FTSE 100 started out strong after the Bank of England Governor Mark Carney assured investors that interest rates will not be rising in the near term.
"The pledge to keep the cost of borrowing low was welcomed by equity traders, especially those outside the UK, as the drop in the pound made British stocks more attractive.
"The rally in stocks was short-lived as the overall sentiment turned negative, when the oil price declined severely.
"It was reminiscent of late 2015 and early 2016 when weak oil prices dragged equity markets lower as fear of falling inflation took over."
On the currency markets, the pound was struggling in response to Mr Carney's Mansion House speech in which he argued against a hike in the cost of borrowing.
Speaking after three Bank policymakers called for a rate rise last Thursday, Mr Carney said: "From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment."
Sterling was down 0.9% versus the US dollar at 1.261 and 0.7% lower against the euro at 1.134.
Across Europe, Germany's Dax dropped 0.6% and the Cac 40 in France was 0.3% lower.
In UK stocks, banking giant Barclays dropped 3.95p to 202.8p after the lender and four former top bankers, including ex-boss John Varley, were charged with fraud over side-deals struck during the bank's emergency fundraising at the height of the financial crisis.
The Serious Fraud Office said it had brought charges of conspiracy to commit fraud against the bank itself as well as ex-chief executive Mr Varley, Roger Jenkins, Thomas Kalaris and Richard Boath after a five-year investigation into the events surrounding its cash call in 2008.
The biggest risers on the FTSE 100 Index were Paddy Power Betfair up 135p to 8,660p, Smurfit Kappa up 34p to 2,371p, AstraZeneca up 72p to 5,416p, Morrisons up 3p to 247.5p.
The biggest fallers on the FTSE 100 Index were Antofagasta down 37p to 755.5p, Glencore down 11.4p to 276.6p, BHP Billiton down 39p to 1,140p, Next down 124p to 4,024p.