Commodities boom doubts
THAT is it then, the commodity price boom must be over. Morgan Stanley's veteran global chief economist Stephen Roach has warned that the 'mega run for commodities has run its course' and that yesterday's sharp falls 'could be the beginning of the end for the five-year rally in prices'.
Coming hard on the heels of the IMF's warning last week that the boom is ' unsustainable', it raised fears in dealing rooms that the Footsie, which is heavily populated with mining and oil stocks, could struggle should the bottom really fall out of the commodities market.
China's record trade surplus of £10.1bn exerted further downward pressure on prices. The data increased the chances that further interest rate hikes will be needed to slow growth. Growth of 9% in the past four years caused raw material orders to surge, but they would be reduced should rates rise and lending curbed.
Gold for immediate delivery slumped by almost $18 an ounce to $592.87, its lowest level since late June, while copper for three-month delivery dropped to $7565 a tonne from $7820. Platinum lost 3.5% to $1185 an ounce and silver lost 7% to $10 an ounce.
With mining stocks leading the retreat, the Footsie fell 59 points before closing 28.5 points lower at 5,850.8. A sombre Wall Street, which suspended trading for one minute's silence as a mark of respect for the thousands who lost their lives following the 9/11 terrorist attacks five years ago, drifted 49 points lower at the outset.
Vedanta, India's biggest producer of copper and zinc, slumped 82p to 1239p. BHP Billiton, the world's biggest mining company, shed 48p to 934p, while Rio Tinto lost 128p to 2544p, Kazakhmys 60p to 1226p, Anglo American 92p to 2135p and Antofagasta 13p to 448p.
Heavyweight oils were also under the cosh as the price of the black stuff slipped below $66 a barrel. This compares with July's record of $78.40 and follows reports that Iran and the United Nations were making progress over the nuclear question and there is a possibility that BP's 400,000 barrels a day Prudhoe Bay oilfield may be open sooner than expected.
RoyalDutch Shell fell 29p to 1823p, BP 8p to 583p, Cairn Energy 54p to 1947p and BG Group 17½p to 659½p. Secondary stocks featured-Dana Petroleum 49½p lower at 1109½p and JKX Oil & Gas 18¾p cheaper at 258¼p.
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Currently in receipt of a 131p-a-share cash offer from corporate raiders Guy Naggar and Peter Klimts' investment vehicle Dawnay Day, which already sits on 29.9%, fashion retailer Austin Reed rose 9¼p to 136p on counter bid hopes. Word is veteran rag trade wheeler dealer Harold Tillman, who owns Jaeger, could be interested.
Struggling fashion house French Connection, in which ubiquitous Icelandic investor Baugur owns 14%, gained 8¾p to 206¾p on hopes today's interim statement provides no further shocks. Evolution forecasts a first-half loss of £1.5m and expects the 1.7p dividend to be passed.
Sports Cafe, the loss-making sports bar group, jumped 8½p to 45½p on news of a bid approach. Dealers hear that the take-out price could be north of 60p a share and more than one party is interested.
Recently SC, whose chief executive William Balkou sits on 25.8%, said it was opening a string of betting offices close to or next to its pubs.
Media group Aegis eased 2½p to 125½p after ABN Amro placed 34m shares with institutional investors at 125½p. The Trustee of Aegis's Employee Share Trust bought 4m at 125.59p.
Burst Media Corporation crashed 52p to 28½p on a shock warning that results for the year to end-December 2006 will be ' significantly below expectations'.
Ultimate Finance edged up ¼p to 20¼p on whispers it will today report a big increase in maiden full-year profits.
Software developer Z Group eased ½p to 107p despite signing its first ONSPEED mobile retail agreement with leading UK electronics retailer % World. ONSPEED mobile provides internet access through mobile handsets.
Dermasalve Sciences firmed 1p to 15p on hearing that its new hand gel product has tested positive to kill the avian H5N1 (Bird Flu) virus 30 seconds after a single application.
Athelney Trust, which invests in smaller companies, added 15p in a restricted market to 145p following an increase in net asset value to 172.9p per share from 164.5p.
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