A flood in Kazakhstan prompted widespread selling of mining stocks yesterday, continuing the sector’s boom-and-bust movement of recent months. Kazakhmys, the copper miner, warned that a flood at one of its facilities would cut production and take several weeks to repair. The company, which has a market value of more than £7.5 billion, fell 94p to £15.02 and was the biggest faller on the FTSE 100.

Analysts said that, while Kazakhmys may have triggered the sell-off, the mining sector’s fall was also linked to wider concerns about the growing likelihood of poorer economic conditions in 2008 and falling commodity prices. UBS added to the negative sentiment by issuing a research note that downgraded the global mining sector to “neutral” from “overweight”.

Vedanta Resources fell 94p to £20.86 and Antofagasta lost 15½p to 810½p. BHP Billiton was down 34p to £17.11, Anglo American fell 87p to £32.56, Xstrata was off 108p to £32.12 and Rio Tinto lost 82p to £41.68. Mining stocks had only just recovered the value they lost in August when fears of an economic slowdown last resurfaced.

Mining stocks and concern over the impact of rising raw material costs on inflation forced the FTSE 100 down 54.9 points to 6,540.9. However, the volume of shares traded was below average at 2.7 billion as investors waited to hear the Chancellor’s economic outlook in today’s PreBudget Report.

The risers were led by Northern Rock, the troubled bank, after it emerged that a possible £10 billion funding agreement with Citigroup could allow the company to remain independent. There were also rumours that Blackstone Group and Apollo Management had expressed an interest in buying the bank. Northern Rock’s shares rose 14p to 172½p – up 8.8 per cent.

Royal Bank of Scotland lost 9p to 560½p following confirmation that ABN Amro, the Dutch bank, will accept a €71 billion (£49 billion) takeover offer from a consortium led by RBS. Bear Stearns downgraded RBS after giving warning that the deal could weaken its balance sheet and reduce return on equity. Bear Stearns also questioned how easy it would be to integrate ABN’s operations into RBS.

By contrast, Barclays, which triggered the six-month battle for control of ABN, rose 2p to 662p.

HSBC was another bank to lose ground, dropping 17p to 944p after it rejected a new call from an activist investor to hold a strategic review of its operations and corporate governance structure.

Among other large-cap stocks, BP dropped 3p to 569½p and Royal Dutch Shell fell 11p to £19.38 as they followed the price of crude oil down. The price of London Brent was $2.12 lower at $76.78.

SABMiller, the brewer, added 15p to £14.66 after Credit Suisse reiterated its “outperform” rating on the back of positive news from the company’s operations in Colombia and Peru. SAB and its rival, Scottish & Newcastle, also benefited from continuing rumours of consolidation in the brewing sector. S&N was up 12½p to 622p.

— New York: Wall Street retreated after its big gains last week as investors prepared for quarterly corporate earnings reports. At the close the Dow Jones industrial average was down 22.30 points at 14,043.70.

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