The FTSE 100 got off to a poor start this morning as it fell 0.8% to 5221.7, at its opening a short time ago. upward pressure on interest rates.
The decline is being led by commodity producers including Rio Tinto and BHP Billiton.
Rio Tinto, the world's third-biggest mining company, has declined 1.9% to 2,176p, while BHP Billiton, the world's largest mining company, has slipped 3.1%, to 793p.
Oil stocks including BP and Royal Dutch Shell have also dropped in response to oil prices which have fallen below $63 a barrel despite the news Hurricane Wilma is likely to miss key oil facilities in the Gulf of Mexico. BP has fallen 7.5p, or 1.21%, to 612.5p, while Shell has dropped 24p, or 1.39%, to 1700p.
Elsewhere Touchstone Group has added 6p, or 4.7%, to 135p, after the supplier of business and financial software said earnings in the first half will be "significantly" higher than in the same period last year. Revenue for the six months ending in September rose more than 20%.
In Japan, the Nikkei 225 Stock Average dropped for a sixth day, losing 222.75 points, or 1.7%, to 13,129.49 at its close a short time ago. The fall was led by carmakers such as Toyota, after a report showed US producer prices had the biggest jump in 15 years, fuelling concerns the Federal Reserve will keep raising interest rates.
Semiconductor-related shares including Advantest also slid after Intel, the world's biggest chipmaker, forecast quarterly sales that may miss some analysts' estimates.
Toyota, the world's biggest carmaker by market value, dropped 90 yen, or 1.7%, to 5,210. Stocks fell after Toyota said it will spend 15.5bn yen to fix defects on 1.27m vehicles in Japan's largest ever one-time recall.
Nissan, Japan's second-biggest carmaker, also fell 26 yen, or 2.1%, to 1,232, while Fuji Photo Film, the world's fifth-largest seller of digital cameras, dropped 100 yen, or 2.6%, to 3,760.
Advantest, the world's biggest maker of equipment used to test memory chips, fell 280 yen, or 3.2%, to 8,570. Tokyo Electron, the world's second-largest maker of chip-production equipment, slipped 150 yen, or 2.5%, to 5,800. Both companies supply equipment to Intel.
Elsewhere, Chugai Pharmaceutical, the local unit of Roche Holding AG, gained 115 yen, or 4.8%, to 2,505. The company said yesterday its MRA treatment for Castleman's disease slows the development of rheumatoid arthritis.
In the US, chronic inflation fears sent stocks skidding yesterday as the Dow Jones Industrial Average fell 62.84 points, or 0.6%, to 10,285.26, after a sharp jump in wholesale prices overshadowed strong profit reports from several companies.
Better-than-expected earnings from Johnson & Johnson, IBM and United Technologies were overlooked by investors preoccupied by the biggest increase in the Labour Department's producer price index in 15 years. The PPI rose 1.9% in September on high energy and food costs. With those costs removed, core PPI still rose 0.3%, higher than Wall Street expected.
Even though Johnson & Johnson reported profit that beat forecasts by jumping 12%, stocks still slipped $0.03, to $62.97. United Technologies also fell $1.16, to $49.95, despite reporting positive growth across its businesses, particularly in its Carrier heating and air-conditioning division.
Among the few winners IBM gained $0.89, to $83.48. It posted a slight decline in profit but beat analysts' expectations by $0.13 a share. 3M also jumped $2.24, to $74.71, after beating forecasts and raising its outlook for the fourth quarter.
Microsoft, added $0.04 to close at $24.57 a share, while Boeing, slipped $0.12 to $67.12.
Crude oil settled at $63.20, down $1.66, and while a drop in price may have mitigated inflation concerns, it may have also contributed to a sharp sell-off in oil stocks, most notably Exxon Mobil, which fell 4.35% to $56.30.IFAonline
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