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FTSE falters as commodity stocks crumple

Reuters
People pass by the Reserve Bar Stock Exchange in the City of London, Britain July 3, 2015. REUTERS/Peter Nicholls

By Liisa Tuhkanen and Sudip Kar-Gupta

LONDON (Reuters) - The FTSE 100 slipped on Tuesday, hit by a pick-up in inflation and a decline in energy and mining stocks as oil and metals prices fell.

The FTSE 100 (.FTSE) closed down 0.4 percent at 6,526.29 points, more than 8 percent below its record high of 7,122.74, reached in April.

Data showing British inflation edged up in July pushed sterling to its strongest in 7 1/2 years against a trade-weighted basket of currencies. The FTSE was affected because a strong pound can hurt exporters.

Mining companies Antofagasta (ANTO.L), Anglo American (AAL.L) and BHP Billiton (BLT.L) fell 2.1 to 1.8 percent as copper prices dropped towards six-year lows. Weak oil prices also weighed on the shares of BP (BP.L) and Royal Dutch Shell (RDSa.L), down 1.2 and 1.6 percent respectively. [MET/L] [O/R]

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Oil and metals companies have come under pressure after China, a major commodities consumer, devalued its currency last week, fuelling fears about its economy.

"Brent crude has dropped below $50 a barrel and China, the world's largest exporter, is potentially now unleashing a new wave of deflationary forces around the world through the devaluation of its currency," said Peter Cameron, associate fund manager at EdenTree Investment Management.

"In this context it's unclear why the Bank of England would consider raising rates anytime soon, even after today's inflation figures," he added.

Among mid-caps, oil explorer Cairn Energy (CNE.L) dropped 7.3 percent, hurt by a wider after-tax loss in the first half of the financial year.

Bucking the trend for commodity stocks, Glencore (GLEN.L) closed up 3.7 percent for the day. The company said it may close its Eland platinum mine in South Africa because of falling prices.

Also on the upside, pharmaceuticals group Shire (SHP.L) rose 1.6 percent. The company's U.S-listed shares (SHPG.O) rallied towards the end of trading overnight to end up off their intraday lows, as the Nasdaq Biotech Index (.NBI) rising 2.1 percent on Monday. [.N]

The FTSE 100 has given up the gains it made earlier in the year, and is currently roughly flat for 2015.

(Editing by Larry King)