Market Report: Miners lose sparkle as copper price plunges

Twenty-two years after the miners' strike few people would have predicted the industry's importance to the London financial markets. Its influence is still gaining, and will increase further in coming weeks as Lonmin looks likely to replace Cable & Wireless in the FTSE 100, taking the sector's weighting up to about 7 per cent.

But a bad day for the mining sector normally means a bad day for the markets, and yesterday was a terrible day for miners.

A 2 per cent fall overnight in the copper price sparked a sell-off in London-traded mining stocks, led by the copper producers Antofagasta, down 82p at 2,021p, and Kazakhmys, 33.5p lower at 855.5p.

No stocks escaped the selling pressure, although most metal futures traders were unfazed by the slide, as in recent weeks the pattern has been for a sell-off at the start of the week that has been more than compensated for by buying later in the week.

One metals trader said: "There is nothing fundamentally wrong with the market. I expect it will rebound later in the week. The iron ore market should strengthen as the impact of the cyclone season in Australia becomes more apparent and the demand situation from China and India is unchanged. This is nothing more than profit-taking in a long-term upward market."

Of the major mining stocks, Rio Tinto was down 59p at 2,630p, BHP Billiton closed 29.5p lower at 934.5p, and Anglo American shed 80p at 2,050p. The second liners Lonmin, off 110p at 2,200p, and Vedanta Resources, off 50p at 1,069p, were not spared in the carnage. The market was not helped by a decline in the price of crude. The two largest index constituents - the oil producersBP, 3.5p lower at 633.5p, and Shell, 6p lower at 1,819p - also ended the day in negative territory as the FTSE 100 index of leading shares fell 40.4 to 5857.4.

There was also pressure from the Dow Jones as New York opened lower, mainly triggered by fears about rising 10-year US Treasury bond yields, currently at their highest since June 2004. Property was also weak as the heavyweight broker Merrill Lynch downgraded Liberty International to "hold" from "buy" on valuation grounds, sending its shares 29p lower at 1,104p.

The US broker also downgraded to "neutral" Liberty's rivals Great Portland Estates, down 17.25p to 458.5p, and Unite Group, down 25.5p to 425p, also on valuation grounds.

After a recent stellar performance, large-cap landowners were also hammered, as British Land gave up 35p to close at 1,222.5p and Land Securities drop-ped 41p to 1,842p.

On a grim day for traders there were few winners among blue-chip stocks. The Anglo-Dutch household goods maker,Reckitt Benckiser, climbed 35p to 2,062p, while the publishing group Pearson was 16p better at 751p, as the group's Penguin subsidiary emerged as the favourite to win the rights to publish the memoirs of the former chairman of the US Federal Reserve, Alan Greenspan.

Banking observers kept a close eye onLloyds TSB, down 3.75p to 543.25p, as traders noted heavy volume in the April 600p calls in the option market. Its stock has been the subject of persistent takeover rumours in recent months, and most traders believe a buyer is likely to come from outside the UK.

Shares in Elan Corporation were suspended at €11.23, pending a review of the Irish pharmaceuticals group's Tysabri multiple sclerosis treatment by the Food and Drug Administration. A positive outcome for the treatment, which ran into complications during phase III trials, could send Elan shares back to the €20 level they traded at before news of the trial broke.

Tullow Oil, up 7.25p at 310.75p, brought some cheer to commodity-based stocks as it reported good drilling results from its Waraga well in Uganda. Hardman Resources, which has a 50 per cent stake in the well, also rallied, finishing 3p better at 82.5p. Merrill Lynch reiterated its "buy" stance on Tullow Oil and increased its target price to 347p.

Colt Telecom was under pressure as traders talked of an increasing amount of short positions being taken in the stock. Its shares have gained on speculative buying in recent sessions, mainly because of bid rumours at other telecoms firms.

Bearish traders pointed to last week's resignation of the managing director of Colt's German unit and ongoing difficult trading conditions at its core fixed-line business. Shares in Colt Telecom fell 1.5p to 68.25p after the broker Bridgewell Securities also urged its clients to sell its stock.

The Yves Saint Laurent clothing retailer, Marchpole, was the star performer in the London market, adding 6.75p, or 51.9 per cent, to 19.75p. The company saidit is confident of beating expectations for the current year, adding that it plans to buy back some of its shares.