Oct. 5--As the credit crunch has wreaked its havoc across the financial sector there has been much concern about when and how it would affect corporate activity in other sectors, in particular mergers and acquisitions.

M&A statistics have shown for many months that the volume and size of such deals has been dwindling. But last week saw a major blow to the sector as mining giant Xstrata abandoned its plans to buy African aluminium miner Lonmin.

Dropping its £5 billion bid sent Lonmin shares plunging more than 30 per cent over the week, down from 2469p to 1701p. But the news took a wider toll on the whole mining sector and also the oil and gas sectors.

The other big fallers on the week, all from the FTSE 100, were Indian miner Vedanta, down 21 per cent, oil company Cairn, down 17 per cent, silver miner Fresnillo, down 17 per cent, and Antofagasta, down 15 per cent.

The only good news for the sector was that BHP Billiton insisted it was pressing ahead with its long-running £55 billion takeover of Rio Tinto, but even here there were fears that BHP may have to pay more for loans needed to finance that takeover.

The effect was to knock BHP's shares by 14 per cent over the week and Rio's by eight per cent.

The whole mining sector was hit by concerns that the global financial crisis is inevitably turning into a economic slump on an international scale.

That must inevitably mean that demand for goods even from the booming emerging economies of India and China will decline and their until now apparently insatiable appetite for raw materials will fade.

On top of that there is the dollar. As US Treasury Secretary Hank Paulson finally won political approval for his bail-out plan, the markets realised the deal comes at a price. The effect of this massive state-backed scheme has been to knock the value of the dollar sharply lower.

Commodities, from iron to oil to coal, have always been priced in dollars and as the greenback continues to suffer, so the commodity-producing companies find the common currency of their business is softening.

The gyrations of the banking sector are proving ever more useless as a guide to the global economy. Every vote in the Senate or half-formed comment from a politician can send financial shares into a spin.

But the profound shifts in the value of the mining and other extraction companies is a bigger issue. To be fair, those shares have also proved capable of being knocked this way and that in recent months. But in comparison with the banks, they have become a lodestone of wider economic sentiment.

The banking party has been over for at least a year. The mining party may be about to grind to a halt, albeit hopefully rather less dramatically.

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