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FTSE 250 drops 4 percent

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by Elaine Frei

The London equities markets suffered another day of losses on Monday, taking the FTSE 100 to its lowest point since the middle of December. The 100 dropped 2.2 percent to 5,523.7, bringing losses in four sessions to 5.4 percent. The FTSE 250 dropped 4 percent to 8,828.6, its largest daily percentage loss in six years. Mining, and steel were all instrumental in the declines, as was news of lower metals prices and declining markets in Asia.

Some analysts blamed much of the recent declines on unusual amounts of derivatives activity by hedge funds and investment banks that are said to have made substantial bets on the direction of volatility in the markets. Those investments are now unraveling and the banks and funds are trying, it is said, to balance their books by selling FTSE index futures. One trader said that Monday was repeat of Wednesday’s huge losses.

Corus Group was the biggest loser of the day on the 100. The steel producer lost 9.3 percent to 344½p.

In the mining sector, Xstrata was down 8.7 percent to £17.64. Kazakhmys dropped 8.5 percent to 958p, while Antofagasta declined by 7.3 percent to £18.89.

Only nine stocks on the 100 saw gains on the day. Alliance & Leicester, for example, saw a gain of 2.5 percent to £11.43 on the news that Credit Agricole is considering a bid.

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News posted: May 22, 2006

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