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The hangover for the mining sector following its bumper earnings season continued on Friday as traders showed little appetite for risk after yesterday’s big market sell-off.
Resource stocks were at the forefront of the correction as dollar strength, triggered by speculation over when the US Federal Reserve will begin tapering its support for the American economy, knocked the price of commodities including iron ore.
The price of Brent crude also dived 2.5% yesterday and is now trading at its lowest level since May as surging cases of the Delta variant dampen the demand outlook.
There was little respite today, with Rio Tinto trading just 1p higher at 5,193p and BP falling another 0.75p to 287.2p after Brent crude dipped half a per cent to $63.41 a barrel.
The FTSE 100 index, which closed 1.5% lower yesterday, eased another 9.48 points to 7,049.38 and was only supported by 1% gains for Sainsbury’s and JD Sports Fashion on the back of the M&S profits upgrade and improved Morrisons takeover price.
The surge in commodity prices earlier this year meant record-breaking earnings and dividends in the sector’s latest results, with BHP this week disclosing annual shareholder returns amounting to $15 billion.
But with “sell” recommendations on both BHP and Rio Tinto, analysts at Liberum said the recent commodity price weakness had flushed out the more “speculative elements” of the trade.
They are buyers of Ferrexpo and Glencore and favour Chilean copper miner Antofagasta on any further share price weakness. The stock was 29p lower at 1,376p today.
The FTSE 250 index held firm, rising 10.23 points to 23,617.10.
In corporate news, insulation and construction supplier Kingspan rose 2% after revealing trading profits had risen by 64%.