It is not just concern about a possible Chinese interest rate rise which has dampened enthusiasm for commodities.
A sharp rise in US bond yields yesterday has pushed the dollar higher, and in turn helped push metals including copper and gold down from their recent record highs. The sell-off in US bonds followed President Obama's proposed move to extend tax cuts, which some analysts said could increase the US deficit by as much as $900bn. In the short term it could help lift the US economy - and may reduce the need for another round of quantitative easing - but longer term it could have repercussions for the country's financial state.
So mining shares have come under pressure, with Randgold Resources down 85p at £58.20, Eurasian Natural Resources Corporation 8p lower at 936.5p and Kazakhmys down 22p at £15.32. Joshua Raymond, market strategist at City Index, said:
With the US dollar gaining around 0.5% this morning, boosted by the biggest one day rise in US 10-year Treasury yields yesterday on the back of the proposed move by President Obama to extend tax cuts, this is curbing demand for key metals such as copper which has retraced from record highs and pressurizing key mining stocks such as Kazakhmys and ENRC in the process.
Back with European debt worries for a moment, Portuguese, Irish and Greek bonds are coming under pressure again, with yields starting to edge higher.
