Market Report: Commodities sell-off leaves Fresnillo weaker

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The Independent Online

In a session the miners will be eager to forget, Fresnillo was left at the foot of the top-tier index after commodity prices headed south in another major sell-off.

As its blue-chip peers were hit by China's continued attempts to limit inflation, the world's largest silver producer was the worst performer, shifting back 107p to 1,304p. The fall means that the Mexico-based group has lost nearly 20 per cent of its share price since the start of the month, tracking the fortunes of the white metal, which yesterday lost yet more of its lustre.

A fortnight ago silver stood at record highs, but since then it has seen a severe correction, with City Index's Giles Watts calling it a "mini price crash". However, it was by no means the only commodity to suffer, as the decision by China's central bank to increase its reserve requirement ratio for the fifth time in 2011 led to increased fears that the country's appetite for resources will diminish.

There were some calming voices in the market, including Guardian Stockbrokers' Atif Latif, who said he does not believe "the commodity bull market has run its course". Nonetheless, with resource stocks deep in the red, the FTSE 100 was dragged down to a session low of 5,882.39 points, before positive US economic data helped it recover to 5,944.96 by the bell, a fall over the day of 31.04.

Some groups were happy to see oil among the commodities on the slide, including International Airlines Group (IAG), which was also celebrating the news that its British Airways unit had managed to reach an agreement with cabin crew over their long-standing dispute.

Yet the group only managed to ease forwards 0.2p to 246.6p as Morgan Stanley removed it from the broker's "best ideas" list. Its analysts made the decision because, they said, despite IAG remaining their top sector pick, "ultimately, near-term share performance is likely to be most leveraged to the volatility in oil prices and [foreign exchange rates]".

Unsurprisingly, it ended up being a good session for the defensive stocks as investors searched for safety. The utilities were among the risers, and the sector was given another boost by the continued presence of bid chatter.

Scottish & Southern Energy powered up 17p to 1,368p off the back of reports from Europe claiming Iberdrola has been mulling over the possibility of making an approach. It is not the first time the Spanish energy giant has been mentioned in takeover talk this week, coming after vague speculation on Wednesday that it could make a joint move with Qatar for Centrica, 6.5p stronger at 318.2p.

Meanwhile on the FTSE 250, reheated gossip drove Northumbrian Water 4.2p higher to 361.2p as chatter that the Ontario Teachers Pension Fund (its largest shareholder) could make an offer returned yet again, with a possible price being mentioned of 450p a share.

Back among the blue-chip companies, the pharmaceutical groups were also being helped by their defensive qualities with Shire, GlaxoSmithKline and AstraZeneca lifted 36p to 1,958p, 21.5p to 1,331p and 44p to 3,186.5p respectively. Astra received another boost from UBS's decision late on Wednesday to change its rating to "buy", with the broker saying new "cost effectiveness data on [the drugmaker's blood-thinning product] Brilinta... has renewed our confidence".

There were two clear losers on the mid-tier index as disappointing updates prompted both Keller and Supergroup to drop by around 20 per cent. The latter was the worse off, sliding 355p to 1,219p after revealing its sales growth had slowed over the fourth-quarter, while a profit warning from the former meant it plummeted 132p to 529p.

FirstGroup continued to rise in the wake of Wednesday's final results, with the transport group ticking up 7.9p to 359.7p. Nomura gave it a push, upgrading its advice to "neutral" and saying the company's plans to turn around its struggling US school bus business "should prevent significant further deterioration".

Carillion benefited from Canaccord Genuity turning its eye towards the support services provider, as the broker started its coverage by recommending the stock as a "buy". Its analyst Arabella Llewellyn was positive on the group's £300m acquisition of Eaga, which was completed last month, saying the energy efficiency specialist can "bloom in the safe and well-capitalised hands of Carillion's management team".

There was little cause for celebration at Luminar, as the nightclub owner – whose establishments include the Oceana chain – revealed a pre-tax loss for the year of £1m, prompting the penny stock 1.76p lower to 7.11p on the fledgling index.

Among the small-caps, DTZ Holdings charged forwards 12p to 51p after the French group Saint George Participations said it was involved in discussions that could see it make a bid for the property consultant.