MARKET REPORT

FERREXPO traded lower yesterday as London's benchmark FTSE 100 index, under pressure from weaker commodity prices, renewed fears for the banking sector and concerns about the health of the global economy, drove deep into bear-market territory.

The FTSE 100 closed down 121.4 points at 5,240.7, down more than 7 per cent over the past seven sessions and more than 20 per cent from its June 2007 peak. Ferrexpo was among the weakest at fourth place on the loser board, down 14p at 184p, as metals prices eased, dragging down the heavyweight mining issues. Concern about the volatile political situation in Ukraine, the location of Ferrexpo's iron ore assets, and moves among fund managers to unwind positions before the FTSE 100 reshuffle next week, also weighed on the stock, according to traders.

Commodity prices have retreated after hitting record highs earlier this year. Tracking these movements, resource stocks have suffered and Ferrexpo is among the hardest hit, down almost 60 per cent from a high of 455.5p on 10 June. Traders now expect the company to lose its place among the blue chips when the index is reviewed on Wednesday.

"It looks like funds are preparing for the change," said one analyst. "Fundamentally, this is a good company. But it's been hit by both the general trend of lower prices in the commodity markets and nervousness about what is going on in Ukraine, even though its assets are unaffected."

In the wider sector, Cazenove said weighed-in on the recent sell- off. "Even allowing for the possibility of a more pronounced decline in oil and non-oil commodity prices than assumed in current bottom- up estimates, the resulting impact on profit estimates would, in our view, be less dramatic than implied by current valuations," the broker said, adding that in anticipation of a correction it has increased the weighting of mining in its FTSE 100 model portfolio while maintaining an overweight exposure to the oil sector.

Last night's movements, however, told of less optimism among investors. Kazakhmys closed down 86.5p at 975.5p, Antofagasta was off 38p at 502.5p and Anglo American eased back to 2,304p, down 126p.

Overall, it was a bad day for the London market. In the banking sector, Alliance & Leicester was down 11.75p at 296.5p, Barclays lost 12p to 317.25p and HBOS was down 7p at 275.5p after the European Central Bank's decision to tighten rules governing the type of collateral it will accept in return for short-term loans. The move prompted concern that the Bank of England may follow suit when the Special Liquidity Scheme closes next month.