London’s mining companies broke the FTSE 100’s three-day winning streak on Thursday as the price of iron ore dropped.
The index was also pushed lower after the Bank of England increased its inflation forecast for the UK economy to 4%, twice the bank’s target rate.
“Rio Tinto, Anglo American and BHP as well as Glencore are all lower over concern about iron ore demand out of China, as prices slip to four-month lows,” said CMC Markets analyst Michael Hewson.
“These declines come in spite of Glencore reporting record profits, and a 32% rise in revenue, with the company announcing 1.18 billion dollars in dividends and buybacks when it reported its first half numbers today.”
The miners were joined at the bottom of the FTSE by Lloyds Bank. Analysts at Goldman Sachs downgraded their score for Lloyds over worries about low margins in the UK’s mortgage market.
At the end of the day the FTSE had dropped 3.43 points to 7,120.43.
On the other side of the market, Rolls-Royce shareholders looked on as the value of their investments rose by nearly 6%.
The company had reported first half results on Thursday morning, and was rewarded for its efforts.
“Rolls-Royce appears to have made some progress in reducing its cash flow leakage, which helps to account how it was able to surprise markets with an unexpected first half profit of £393 million, beating consensus expectations of a small loss,” Mr Hewson said.
This came after the Bank of England decided to keep its base interest rate stable at 0.1% and it maintained quantitative easing levels in place.
Sterling rose immediately following the midday announcement, putting pressure on the FTSE 100. But it later gave back gains and was trading flat when markets closed
By the end of the day one pound could buy 1.3934 dollar or 1.1764 euros.
Joshua Mahony, an analyst at IG, said: “The rise in sterling highlights how we are seeing a shift from the expectations that the Bank of England remain dovish despite rising prices. Instead, the BoE sees inflation peaking at a higher level than previously anticipated.”
In New York the S&P 500 was trading up 0.4% and the Dow Jones had gained 0.6% by the time European markets closed.
The Dax in Frankfurt rose 0.3% while the Paris Cac closed up 0.5%.
For the second day running, Frasers Group boss Mike Ashley made headlines as the company confirmed he is planning to step aside as chief executive. The news overshadowed Fraser’s results. The company reported a 94% dip in profits to £8.5 million. Shares dropped 0.2%.
Elsewhere shares in Serco dipped 1.1% even as the company announced its first dividend since 2014.
Shares in Hammerson fell by 4.8% after the landlord slashed the value of its portfolio by 6.4% to £5.5 billion.
The biggest risers on the FTSE 100 were Rolls-Royce, up 6.14p to 110.68p, Whitbread, up 144p to 3,234p, IAG, up 7.42p to 178p, Informa, up 18.9p to 518.2p, and Just Eat Takeaway.com, up 209p to 6,451p.
The biggest fallers on the FTSE 100 were Anglo American, down 173.5p to 3,270.5p, Rio Tinto, down 265p to 6,027p, BHP, down 90p to 2,280p, Lloyds, down 1.4p to 45.905p, and Glencore, down 5.3p to 324p.