Global selloff hits London stocks as commodity prices fall

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Global selloff hits London stocks as commodity prices fall


A global equity selloff spread to London’s stock markets on Friday, as heavily weighted commodity stocks dragged the index lower, with airlines among the lone bright spots after gains for International Consolidated Airlines Group.

The FTSE 100 index
UKX,
-1.62%

fell 0.9% to 6,587 for a weekly loss of 0.7%. The pound
GBPUSD,
-0.67%

fell 0.8% to $1.3909, as investors sought shelter in the dollar as a brutal stock selloff on Wall Street — sparked by climbing bond yields — spread across the globe.

“The aftereffects of the sharp spike in bond yields in the last 24 hours, continue to be felt as we head toward the end of the week and the month, as investors adopt a risk-off approach, with the U.S. dollar rising across the board, with the exception of the Japanese yen, which is also acting as a haven,” said Michael Hewson, chief market analyst at CMC Markets U.K. 

The yield on the 10-year gilt
TMBMKGB-10Y,
0.810%

was up 3 basis points to 0.817%, hovering at levels not seen in almost a year. Global yields have been tracking those of the 10-year U.S. Treasury note
TMUBMUSD10Y,
1.480%
,
which reached above 1.5% on Thursday.

In tandem with stock losses, commodity prices also fell, with copper 
HGK21,
-2.78%
,
platinum
PLJ21,
-2.87%
,
and palladium
PAM21,
-3.49%

futures prices all down by 3% or more. Silver
SIK21,
-3.49%

prices saw similar losses.

Those price drops hit the heavily weighted mining sector in London, with shares of Anglo American
AAL,
-5.37%

falling 5%, and those of BHP Group
BHP,
-3.06%

BHP,
-3.06%

and Rio Tinto
RIO,
-3.07%

RIO,
-1.72%

down 3% each. Shares of Glencore
GLEN,
-3.93%

fell 4%.

Major oil companies also weighed on the index, with shares of BP
BP,
-3.48%

BP,
+1.15%

and Royal Dutch Shell
RDS.A,
-0.35%

RDSA,
-2.77%

dropping 3% and 2%, respectively, as crude prices
CL00,
-2.41%

BRN00,
-2.06%

also came under pressure.

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Nestled in a handful of gainers was the airline sector, which has gained this week amid hopes for the return to travel and signs of pent-up demand. EasyJet
EZJ,
+2.14%

and others reported a rush in bookings earlier in the week, after Prime Minister Boris Johnson laid out a plan for England to exit its strict lockdown.

Shares of International Consolidated Airlines Group
IAG,
+4.35%

rose 4%. The operator of British Airways, Iberia and other airlines swung to a record loss, and said it won’t provide 2021 guidance due to COVID-19 pandemic uncertainty.

Like many airlines, IAG’s year has been dominated by trying to ensure it has access to enough cash and debt to keep the business going through dark times, which it has successfully done.

“One could argue that the worst times could soon be over, particularly as people are starting to think about booking holidays again. IAG is naturally reluctant to issue any earnings guidance for the new financial year, but one can’t help feeling there are grounds to be optimistic about it having significantly more planes in the sky in six to nine months’ time,” said AJ Bell investment director Russ Mould.



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