FTSE underperforms European peers, miners hinder

By Atul Prakash and Alistair Smout

LONDON (Reuters) - Britain's blue-chip share index retreated on Wednesday, underperforming its European peers, as a sharp drop in metals prices put pressure on the mining sector and South Africa-exposed stocks fell as the rand slipped.

The UK mining index was down 2.9 percent, the worst sectoral performer, after copper fell to an eight-week low as rising inventories in Asian warehouses fuelled concerns about weaker demand in top consumer China. Prices of some other industrial metals and gold also fell as the dollar strengthened.

Randgold Resources RRS.L, Antofagasta, Fresnillo and Anglo American fell between 3.1 percent to 5.1 percent. Glencore GLEN.L was down 3.1 percent with added pressure from its update showing a 13-percent drop in earnings.

"Miners lost ground following weaker metals prices and a slump in Glencore profits. Given the recent strong run within the sector, some profit taking was not unexpected," Securequity senior trader, Jawaid Afsar, said.

"However, it seems that the sector is trading near its lows and any further weakness is likely to be met with fresh buyers."

The FTSE 100 closed 0.5 percent down at 6,835.78 points after gaining on Tuesday. The commodity-heavy blue-chip index, which has fallen in five out of the past seven sessions, was the only major European index to end in negative territory.

South Africa-exposed stocks, such as Old Mutual, Mediclinic International and Mondi, fell between 1.6 percent and 4 percent as news that the South African finance minister had been summoned by police hit the rand.

However, WPP closed 1.9 percent higher after hitting a record high during the session as it comfortably beat net sales expectations.

"Advertising is a bellwether for the economy as a whole and WPP’s performance in the first seven months has been reasonably strong following a record performance in 2015 and despite worldwide GDP growth slowing," AJ Bell investment director Russ Mould said.

Housebuilders rallied for a second day, reaching their highest levels since Britain voted to leave the European Union.

Persimmon rose further after posting strong results on Tuesday, showing resilience to the uncertainty around the June 23 referendum. It was up 2.2 percent on Wednesday after a spate of broker upgrades.

"(Persimmon) continues to trade well post-Brexit and at this stage has seen little impact of the referendum risks on underlying demand, supported by strong pent-up demand, tight supply, lower mortgage rates and good mortgage availability," Citi analysts said in a note, raising their target price on the stock and reiterating a "neutral" stance.

Among mid-caps, OneSavings Bank rose nearly 17 percent after reporting a jump in underlying profit, but remained down 20 percent since the Brexit vote.

(Editing by Louise Ireland)