FTSE 100 falls from record as metals retreat

FTSE 100 opens lower as miners retreat

The FTSE 100 fell about 0.2% at the open, underperforming European markets as mining stocks declined. The index pulled back from the record levels reached in the previous session.

Commodity prices retreated from recent highs, weighing on resource stocks. Mining companies featured among the top fallers on FTSE 100 after posting strong gains over the previous month.

Banks and energy stocks also declined in early trading. Healthcare and utilities showed smaller percentage moves as the broader European STOXX 600 posted a more modest decline.

Sterling and gilts both weaken

Sterling fell below $1.38 in early London trading, reversing some of the gains made over previous sessions. GBP/USD traded at $1.3795 after holding above $1.38 in recent days, though the pair remains higher on a month-to-date (MoM) basis.

Gilt yields rose by 2 to 3 basis points (bp) across the curve, lagging moves in euro area government bonds. The 10-year gilt yield climbed to 4.61%, while German bond yields rose by 4 bp to 2.53%.

United Kingdom (UK) government bonds underperformed their European counterparts. The moves came as investors adjusted positions following overnight developments in currency and commodity markets.

The pound has given back some of its recent strength against the United States (US) dollar. Sterling remains higher for January overall despite the intraday decline.

Dollar rebounds on Fed chairman reports

The dollar strengthened after reports emerged that Donald Trump is preparing to nominate Kevin Warsh as Federal Reserve (Fed) chairman. The dollar index rose 0.3% following the news, with Trump stating he has decided on his pick.

Multiple reports named former Fed governor Kevin Warsh as the nominee. Prediction markets placed a 92% probability on Warsh's nomination after the reports surfaced.

US 10-year Treasury yields climbed about 4 bp to 4.27%. The moves came as investors unwound recent bearish bets on the dollar.

The greenback remains down for January overall. The dollar has fallen against most major currencies this month despite the intraday bounce.

Precious metals post sharp declines

Gold fell around 4% in European trading hours to $2748 per ounce. The metal extended a volatile selloff after reaching multi-month highs earlier in the week when it traded above $2850 per ounce on Wednesday.

Silver declined more than 6% to $30.12 per ounce, recording a sharper fall than gold. Both precious metals gave back a significant portion of their January gains.

copper prices declined 1.8% to $9385 per tonne on the London Metal Exchange. The base metal showed a smaller percentage decline compared to precious metals.

The selloff in metals is likely to weigh on London-listed miners. The sector had posted strong performance over the previous month before the reversal.

Asian markets fall on risk-off tone

MSCI Asia-Pacific equities excluding Japan dropped as much as 1.3%, marking their biggest one-day fall in a month. China and Hong Kong markets led the declines, falling 1.5% and 1.8% respectively.

S&P 500 futures fell 0.5% while  Nasdaq futures declined 0.6%. Bitcoin dropped 2.7% to $102,450, having traded above $105,000 earlier in the week.

Japanese markets were closed for a public holiday. Trading volumes across Asian markets were above the 30-day average as investors reacted to the Fed chairman speculation.

The moves indicated a negative open for US equity markets. Risk assets declined broadly as the dollar strengthened.

Oil declines but records strong monthly performance

Brent crude oil fell about 1.4% to $76.52 per barrel, pulling back from the four-month high of $78.34 reached earlier in the week. Despite the daily decline, oil is up nearly 15% in January, representing its biggest monthly gain since October 2023.

WTI crude oil declined 1.3% to $73.21 per barrel. The US benchmark has tracked Brent's movements closely throughout January.

Organization of the Petroleum Exporting Countries (OPEC+) production cuts remain in place through the end of the first quarter. Saudi Arabia is maintaining a voluntary output reduction of 1 million barrels per day, providing underlying support for prices.

Middle East tensions and supply disruptions have supported the oil market throughout the month. The daily pullback has not altered the broader positive trend for crude prices.

Corporate news provides updates

Peel Hunt stated that trading has been ahead of expectations, though the investment bank did not provide specific figures. Drax agreed to a tolling deal for new battery storage capacity with no upfront capital cost, with the energy company's shares moving 0.3% higher.

AstraZeneca struck a $1.2 billion deal with CSPC on obesity and diabetes drugs. The pharmaceutical company also reaffirmed plans to invest $15 billion in China by 2030, underlining its commitment to the Chinese market.

Octopus Energy announced a joint venture to enter China's renewable power market. The company will partner with a Chinese state-owned enterprise to expand its international operations.

Corporate activity remained light overall, with most attention focused on macro developments. Companies with China exposure featured in the headlines as ties between Western firms and Chinese partners continued to develop.