Miners were hit as copper priced edged back towards six-year lows, as renewed fears over China rattled fund managers.
On the same day that copper prices dropped back towards six-year lows, weighing on the mining-heavy FTSE 100, a closely-watched survey of fund managers around the world showed investors have piled out of energy and commodities stocks amid renewed fears over China.
Two-thirds of the 202 investors polled by Bank of America Merrill Lynch earlier this month said a Chinese recession and an emerging markets debt crisis are the greatest risks to global markets. In a note entitled “the changing face of fear”, BoA said worries of a 'Grexit’ have since been replaced by concerns about China’s growth prospects. The bank also highlighted that the percentage of investors saying they are “aggressively underweight” commodities has hit a record high of 28pc.
In London, mining and oil stocks became the biggest casualties of Britain’s benchmark index amid further turmoil in Asian stock markets, worries that a Greek bail-out could tear Syriza apart and data showing British inflation edged up in July. Having wiped any gains made so far this year, the FTSE 100 is almost 1pc below where it finished last year. It closed 24.01 points down at 6,526.29.
In China, the Shanghai Composite index plunged 6.1pc as the yuan weakened against the dollar fuelling chatter of a deeper devaluation of the currency. “The speculation that China will loosen lending policies to try and spur business activity is causing more harm than good as it sends out the message that its economy is in dire need of stimulus, and is driving dealers towards the door,” David Madden, of IG, said.
Antofagasta suffered the heftiest loss, down 12p, or 2.1pc to 561.5p. The miner also fell victim to a lowered target price by Credit Suisse. Analysts reckon the group’s purchase of a 50pc stake in Zaldivar, a copper mine in Chile, for $1bn is “value dilutive”, and Antofagasta will need to increase production by 50pc to justify the purchase price. Anglo American fell 1.8pc to 741.9p, BHP Billiton lost 1.9pc to finish at £11.13, and Rio Tintotumbled 1.4pc to £24.12.
Ahead of the release of its half-year results today, Glencore recovered from record-lows, to find itself at the top of the FTSE 100 leaderboard at 176.1p, 3.6pc better, after its fourth-biggest shareholder Harris Associates upped its stake to 4.5pc, amid hopes the miner can recover. A Sunday Telegraphreport revealed Harris had a 1pc holding as of June 30. The increased stake is now said to be worth around $1.6bn.
Meanwhile, Brent crude came under further pressure, hitting an intraday low of $48.25 per barrel. Royal Dutch Shell B shares were off by 29.5p at £17.83, while BP edged 4.4p lower to 373.8p.
On the mid-cap index, platinum producer Lonmin hit a record low, down 2.7p, or 7.6pc, to 33p following a price target cut by RBC Capital Markets. In a note entitled “from bad to worse”, RBC said weak platinum prices presented a risk to the company’s ability to generate cash flow in the future, despite plans to cut headcount and costs.
Richard Hatch, of RBC Capital Markets, warned “Lonmin’s debt falls due in the first half of next year and we believe the company could struggle to refinance this given the current state of the platinum market”.
Gold also lost its shine, with the spot price inching downwards to $1,116 as data from the US revealed housing starts jumped in July to its highest level in almost eight years, supporting the case for an interest rate rise by the Federal Reserve next month. Fresnillo was off by 11.5p at 659.5p, whileRandgold Resources crept 8p higher to £39.91.
Despite a strong set of half-year results, Persimmon found itself among the laggards. Pre-tax profit jumped 31pc to £272.8m, while revenue advanced 11pc to £1.3bn. However, a rating downgrade by Numis pushed the stock 37p lower to £20.84. Chris Millington, of Numis, said “while the company does have good income attractions and strong returns we feel superior value exists elsewhere”.
Oil explorer Cairn Energy fell into the red, down 7.3pc to 143.2p, as investors were left unimpressed by half-year results.
The mid-cap company posted a bigger than expected loss after tax of £230m, driven by a $177m impairment charge relating to the ailing value of its 10pc stake in Cairn India, a holding it cannot sell due to a tax dispute with the Indian government.
Caren Crowley, of Davy, said “a resolution to the dispute is the major catalyst for Cairn Energy’s share price but we remain concerned that the process could be lengthy and the outcome predictable”.
Finally, William Hill climbed 1.8pc to 382.7p after Numis upgraded the stock to a “buy”, saying it is a “soundly-financed market leader, well-placed to weather competition and regulation”.
source: The Telegraph
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