FTSE retreats as basic resources companies fall

Tuesday, 22 June 2010 12:20

By myfinances.co.uk staff

The FTSE 100 Index retreated 86.28 points, or 1.6 per cent, to 5,212.83 in morning trading as shares fell the most in more than two weeks as basic resources companies fell back on speculation yesterday's gains may have been overdone.

China's yuan declined 0.2 per cent against the dollar today, the most since December 2008, on speculation the central bank will intervene to limit gains after dropping the two-year peg to the dollar. A weaker yuan increases the price of commodities for buyers in China, the world's biggest consumer of copper.

ENRC retreated 2.7 per cent to 1,033p as copper, lead and nickel fell in London. Kazakhmys, Kazakhstan's largest copper producer, slid 3.2 per cent to 1,196p. Xstrata, the world's fourth-largest copper producer, slipped 2.6 per cent to 1,048.5p.

British Gas lost 3.9 per cent to 1,081.5p. The UK's third-largest natural-gas producer was downgraded to "neutral" from "buy" at Goldman Sachs after recent share-price gains.

BP dropped 3.3 per cent to 338.15p. The oil company aims to sell assets, improve its safety standards and may replace chief executive Tony Hayward as part of a three-stage recovery plan after shares plummeted in the wake of the Gulf of Mexico oil spill.

Meanwhile, the chancellor of the exchequer, George Osborne, is preparing to present his emergency budget at 12:30 p.m. in London today. The youngest chancellor since 1886 is staking the government's reputation on keeping Britain's top-grade investment rating with measures that the independent Institute for Fiscal Studies estimates will slice £85 billion off the budget, equivalent to 5.7 per cent of gross domestic product, to eliminate the shortfall by 2015.

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