The FTSE 100 index has shown pretty mild trends so far today. As I write, the index is at 7,473, which is just around 0.1% up from the last close. There is really nothing dramatic going on in the prices of index components today either. However, I could not help observing a trend among the biggest losers.
FTSE 100 miners are big losers today
Three of the 10 biggest losers are industrial metal miners. Since they are also among the biggest dividend yield stocks, they attracted my attention in particular. Rio Tinto has seen the biggest decline of 2.8%, followed by Anglo American, which is down by 1.6%, and Glencore, which has fallen by 1.3%. The big miner not on this list, and in fact the biggest FTSE 100 dividend yield stock, is Evraz. I think there is very good reason for that. But I will come to it later. Also note that BHP has stopped trading on the London Stock Exchange from today onwards, so it is no longer in consideration when talking about industrial metal and commodity miners.
Why are they down?
So why are they down? For lack of any immediate triggers that I can find, I would think this is sentiment-driven. There are risks to economic growth, and as cyclical stocks, miners are bound to be impacted in a slow down. There are two developments to consider here. The first, of course, is inflation, which has been looming large as a risk for a few months now.
In fact, if it were not for the fear of rising inflation, it is quite likely that the miners would still be in a boom. They did very well recently as demand for metals was pushed up by Chinese public spending. But when fears of a broad-based price rise started doing the rounds, the government pulled back. Despite the subsequent decline in metal prices however, inflation continues to rise.
High inflation in turn is sparking higher interest rates. Forecasters now expect the Bank of England to continuously increase interest rates in its monetary policy meetings. This could further slow down the economy. And mining stocks are nothing if not cyclical. So it follows that risks to the economy could result in some sentiment-driven damage to the stock prices.
What happens next?
That said, it is entirely possible that before the end of the day, the miners could have completely flipped the script and ended up with gains. Evraz, for instance, is up close to 1% so far today after it released its production report. The report itself is mixed, but it does show an increase in sales in the final quarter of 2021 compared to the quarter before. Also, production of coking coal and iron ore is up, even though that for steel products is slightly down.
What it means for my investments
But since all the others are down so far, I would look out for more such movements in their prices. That could offer me a clue on investor outlook on the mining sector. I am invested in both Anglo American and Rio Tinto, and the key to how much longer I should stay invested might just be in these easy-to-miss market movements.
