Basic resources stocks slumped on the first trading day of the year on Monday, with poor factory activity data from top metals consumer China prompting investors to cut their exposure to the sector.
The UK mining index .FTNMX1770 fell 3.6 percent, the worst sectoral performer and the biggest one-day percentage drop since mid-December. Shares in Anglo American (AAL.L), Glencore (GLEN.L), Antofagasta (ANTO.L), BHP Billiton (BLT.L) and Rio Tinto (RIO.L) dropped 3.4 to 7.0 percent.
“The mining space remains under considerable pressure on account of sector adjustment to years of over-expansion, resulting in supply gluts with slowing global growth,” Mike van Dulken, head of research at Accendo Markets, said.
“The overnight China data is likely to keep a cap on sector sentiment until we get signs of stabilisation in China, hints of more stimulus from Beijing or indeed solid signs of a euro zone rebound.”
A private survey showed that China’s factory activity contracted for the 10th straight month in December and at a sharper pace than in November, dampening hopes that the economy will enter 2016 on steadier footing.
The mining sector put pressure on the broader FTSE 100 index .FTSE, which fell 1.8 percent to 6,129.29 points by 0848 GMT. The falls were on the top of a 5 percent decline in 2015.
Energy stocks also slipped, with the UK Oil and Gas index .FTNMX0530 down 1.3 percent after oil prices fell again on concerns over Asia’s slowing economies, after jumping in early trading as relations between major crude producers Saudi Arabia and Iran deteriorated.
Saudi Arabia, the world’s biggest oil exporter, cut diplomatic ties with Iran on Sunday in response to the storming of its embassy in Tehran. The diplomatic row between the two major oil producers escalated following Riyadh’s execution of a prominent Shi’ite Muslim cleric on Saturday.
Among mid-cap companies, shares in Cairn Energy (CNE.L) rose 3 percent after the oil explorer said it had got positive results from a well off the coast of Senegal.