Miners drag European Indices lower as Libya concerns weigh on sentiment

<p>Traders sold out of risky asset classes today reacting to escalating fighting in Libya forcing the FTSE 100 and DAX lower between 0.3% and 0.5%. What is notable today […]</p>

Traders sold out of risky asset classes today reacting to escalating fighting in Libya forcing the FTSE 100 and DAX lower between 0.3% and 0.5%.

What is notable today is that despite a 0.5% sell off in the price of both Nymex and Brent crude oil, induced by speculation that OPEC may boost output, this has simply not been enough to wet the appetites of investors to buy back into equities. The last few weeks has seen traders use any fall in the price of crude oil as an opportunity to buy into share weakness in hopes of a short term bounce. That has not happened today which suggests that traders are more concerned about the longer term implications of instability in Libya and the Middle East on the price of crude oil, particularly in the context of Libya seemingly stepping closer to civil war with each new day.

In truth, the FTSE 100 has hit a bit of a wall stopping any further movement to the upside of late. The UK Index has trended sideways within a trading range of 200 points for much of the year and traders are waiting for a break out.

The miners were the key drag on the FTSE 100 Index today with the sector falling over 2% in trading and stocks such as Randgold Resources, Kazakmhys and Antofagasta suffering the most. Randgold Resources shares fell as much as 8.9% on shareholder concern that violence in the Ivory Coast could hit operations there. Randgold’s peer Cluff Gold suspended operations in the country yesterday.

Shares in Pace Group also plummeted 18% today after the world’s largest set top box maker reduced its sales growth target for the year after a large client delayed a big order until 2012. The news weighed on sentiment despite an upbeat outlook for the company and shares quickly traded to its lowest level since the end of January.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.