London shares fall sharply as commodities plunge

The benchmark FTSE 100 index shed 153.74 points, or 2.35 percent, to close at 6,388.46 points (AFP Photo/Ben Stansall)

London (AFP) - Shares in London fell more than two percent on Wednesday as weak commodity prices weighed on investor sentiment.

The benchmark FTSE 100 index shed 153.74 points, or 2.35 percent, to close at 6,388.46 points.

"It's been a bruising session for the FTSE 100 today with traders clearly wanting to sell down holdings in natural resource stocks," said Tony Cross, market analyst at Trustnet Direct.

"Oil prices have been very much in focus of late and there's a growing consensus that $40 a barrel will be the floor, but in the last 24 hours we’ve seen pressure heaped onto metals prices," the analyst said.

"Copper has been the most notable, slumping by as much as eight percent at one point and hammering the likes of Antofagasta," Cross added.

World oil prices remained close to six-year lows after major crude producers stressed they would maintain output levels despite global oversupply, while traders awaited the latest update on US crude inventories.

"With the World Bank cutting its global growth forecasts, it really does seem as if the oversupply situation isn't going to disappear any time soon," Trustnet Direct's Cross said.

Chris Beauchamp, market analyst at IG, noted: "A dire reading on US retail sales and underwhelming results from JPMorgan hit risk appetite hard as well.

"The knock-on effect was seen in the carnage in the mining sector," he said.

Among the worst-hit miners, Glencore plummeted 9.28 percent to 244 pence, Anglo American tumbled 8.99 percent to 1,042.50 pence, BHP Billiton shed 5.31 percent to 1,285 pence and Antofagasta dropped 4.80 percent to 675 pence.

A few FTSE component stocks managed minor increases, with Royal Mail edging up 1.47 percent to 434.30 pence, still benefiting from the collapse of parcel delivery rival City Link, and Tesco recovering 0.94 percent to 214 pence as it implements a cost-cutting plan.

On the currency markets, sterling strengthened to $1.5235 at 5:24 pm from $1.5160 on Tuesday and to 1.2911 euros from 1.2820.