The FTSE 100 continued to drift lower this morning, reaching a low of 4821.09, as fears of a slowdown in the US and Chinese economies encouraged investors to take profits in equities.
Trading is also expected to be somewhat lacklustre today because US markets are closed for the Independence Day holiday.
By 11.00am (London time) the FTSE 100 index was 3.89 points (-0.08%) lower at 4834.20, while the broader FTSE 250 was practically unchanged at 9276.26.
Uncertainty about the global economic recovery encouraged investors to scurry back to the safety of the US dollar this morning. Government bonds were also in demand, with the price of 10-year UK and German bonds both marginally higher. The former traded at 111.72, representing a yield of 3.323%, while the latter climbed to 103.92 to yield 2.549%.
Risk aversion is usually negative for commodities, but this relationship doesn't seem to be holding today, suggesting correlations may be moving out of sync. September high-grade copper futures traded 0.77% higher at $2.9385 per pound this morning, while October platinum was 0.6% higher at $1,512 an ounce. September palladium gained 1.2% to $431.95 an ounce, while September natural gas climbed 1% to 4.76 per million British thermal units and light sweet crude oil gained 0.5% to $72.92 a barrel. August gold was 0.3% above its previous close at $1211.2 per troy ounce.
China today announced that it will be investing in the development of 23 new infrastructure projects in the west of the country. The total value of this project is said to be 682.2 billion yuan ($100 billion). The projects mainly comprise railways, roads, airports and power stations. Perhaps commodities have been more reactive to this news.
In contrast, mining stocks took the most points off the FTSE this morning, with the likes of Rio Tinto, BHP Billiton and Xstrata among the sector's worst performers, down between 1.5% and 2.1%.
Energy majors were predominantly in the red as well, except BP which rallied 2.45% to 329.9p after a Kuwaiti newspaper reported that Kuwait may acquire some of BP's Middle East and Asian assets. Meanwhile, it is also being rumoured that BP is searching for a shareholder willing to buy a 5% to 10% stake in the company. Rivals Exxon, Total and Royal Dutch Shell have all been touted as potential bidders.
Essar Energy was the energy sector's worst performer, meanwhile, down 0.70% to 460.50p, followed by Cairn Energy which fell 0.54% to 419.8p.
Banks were also down on concerns over their exposure to Europe's sovereign debt, with Royal Bank of Scotland and Barclays the two biggest fallers in the sector down 2% to 39.25p and 1.76% to 262.25p respectively. Lloyds Banking Group today announced it will receive £332 million for selling a portfolio of private equity investments. Its shares were nearly 1% lower at 54.16p.
Elsewhere, Tui Travel bucked the negative trend this morning, gaining 0.7% to 210.60p, after UBS upgraded the company from 'neutral' to 'buy' on the back of attractive valuation grounds. UBS lowered its price target from 265p to 250p, however.
