Rio Tinto, BHP Billiton lead shares lower as commodities prices decline

FTSE: 5,944.96 (-31.04) Mid-250: 11,967.11 (-50.76) Small Cap: 3,273.00 (-8.47)UK SHARES fell for a second day, dragging the benchmark FTSE 100 Index to the lowest level in a week, after China restrained bank lending and European industrial production weakened.

Rio Tinto, BHP Billiton, Xstrata and Fresnillo led basic-resource shares lower as commodities prices declined.

3i Group, Britain’s biggest publicly traded private equity firm, soared 6.7 per cent after reporting a bigger-than-estimated increase in the value of its investments. The FTSE 100 fell 31.04, or 0.5 per cent, to 5,944.96 at the close in London. The gauge has fallen 2.1 per cent this month as a retreat among raw-material producers overshadowed a bigger-than-forecast increase in US payrolls.

The FTSE All- Share Index also dropped 0.5 per cent.

“Nerves over the global economic outlook have continued to fray,” said Angus Campbell, the head of sales at Capital Spreads in London. “Investors’ appetite for equities is being severely tested.” Almost one in three investors said they will put more money in cash and 30 per cent indicated they would cut commodity holdings, according to a Bloomberg survey of 1,263 market participants. China raised reserve requirements for its banks to a record 21 per cent. The central bank moved after reports yesterday showed inflation and lending exceeded economists’ estimates in April, with consumer prices rising more than 5 per cent for a second month.

Industrial Production Figures from the European Union showed industrial production unexpectedly declined in March, led by a drop in output of capital goods. Production in the 17-member euro area slipped 0.2 per cent from February, when it advanced 0.6 per cent.

Rio Tinto, the world’s second-largest mining company by sales, lost 1.7 per cent to 4,114.5 pence, while BHP Billiton, the biggest, fell 1.8 per cent to 2,363.5 pence. Xstrata dropped 2.2 per cent to 1,378.5 pence.

Royal Dutch Shell slipped 1.5 per cent to 2,172 pence, while BP fell 1.1 per cent to 443.3 pence. Tullow Oil fell 1.2 per cent to 1,332 pence after reporting a delay in exploration results from the Zaedyus well off French Guiana in ann interim management statement. 3i advanced 6.7 per cent to 289.9 pence after reporting a bigger-than-estimated increase in the value of its investments. – (Bloomberg)