FTSE 100 Monday close: Shares hit by commodities

By Adrian Lowery
Updated: 11:59 EDT, 15 June 2009

Shares fell heavily today as investors were unnerved by a retreat in commodity prices and a cautious note on the economy from the CBI.

Tight trading: Shares have levelled off after a rally.

After being dragged down from the open by miners, the Footsie's afternoon got no better after Wall Street opened in the red.

The FTSE 100 index closed 115.9 points down at 4,326.0, at which point the Dow Jones Industrial Average was down 189.9 points at 8,609.4.

'There's a combination of nerves creeping into the market after the strength seen since March and the fact that the dollar's strength is hitting commodity prices, and this is having a big impact as they are such a large part of the UK index,' said Keith Bowman equity analyst at Hargreaves Lansdown.

The CBI today said the UK will pull out of recession earlier than forecast, but a sustained recovery is not assured. The business group predicted the economy would stabilise in the fourth quarter of this year but said it would take until the beginning of next year to return to growth.

Miners were knocked by falling metal prices, with Lonmin leading the pack as it suffered a 10% fall of 141p to 1,300p. Rio Tinto was next with a 216p drop to 2,900p, while Kazakhmys was 51p worse off at 686p.

Energy companies joined miners on the way down after the price of oil shed a dollar to $71 a barrel. Royal Dutch Shell was 4% or 71p lower at 1,609p, but BP's drop was limited to 1% - down 10.75p to 504.25p - after a report said respected energy industry boss Paul Anderson was in line to become its next chairman.

Tullow Oil was the biggest oil loser though with a 45.5p fall to 912.5p.

Lloyds Banking Group was one of the few stocks in the black, with a 1.5p rise to 66.8p.

Punch Taverns saw its shares slide 30%, or 44.5p to 104p, after the pub company today announced plans to raise £350m from a share issue, with finnCap recommending investors 'continue to avoid' the stock.

Britain's biggest pub operator says it will use part of the money raised to purchase its outstanding convertible bonds, issued three years ago.

The group says it decided to finance the bonds repurchase through a share issue because tough trading conditions meant it might not be able to redeem them when they mature in December 2010.

'While this move gives Punch breathing room with its banking covenants in the short term, a lot more work has to be done to continue reducing the company's high debt levels,' finnCap says.

Majestic Wine shares fell 4.5%, or 6.5p to 182p after the wine warehouse chain posted a 22% drop in full-year profit, and Evolution Securities cut its rating to 'add' from 'buy'.

Evolution said profit came in £200,000 below forecasts and downgraded its rating on the shares due to the current high valuation -- 13.5 times price earnings -- and flat growth prospects.

The broker says, however, the shares should be supported by its flat final dividend of 7p.

TOMORROW'S AGENDA

• Tesco, one of the world's biggest retailers, is expected to break more records when it post its first-quarter sales figures. Jp Morgan expects the firm's like-for-likes excluding petrol to be up 4% but investors will be just as keen to see the supermarket giant's progress abroad, particularly in its US venture.

• Costa Coffee owner Whitbread will be kicked out of the top tier of the london stock exchange when the latest FTSE reshuffle comes into play next week, and shareholders will be keen to see whether the leisure giant's trading update can offer any more positive news. So far this year Whitbread — the UK's largest hotel and restaurant group — has been a credit crunch winner, with customers flocking to spend money at its cut-price eateries and cheap hotel chain premier Inn. Analysts will be looking for more good news from the company for the 13 weeks to 28 May.

• May inflation figures will give economists another opportunity to take the temperature of the economy. In April the consumer prices index, which excludes mortgage payments, fell to 2.3%, its lowest level in more than a year, as prices were pushed down by lower food and energy costs. Data on the retail prices index — which includes mortgage costs and often used for pay negotiations — are also out.