London close: Chinese fears fuel sell-off

20th Mar 2012 16:26

- Miners drop on Chinese outlook- Glencore to buy Viterra for 3.9bn pounds- Supermarket stocks rise on broker upgradesConcerns about slowing growth in China have dampened sentiment today with miners bearing the brunt of the sell-off as falling house prices and rising fuel costs are feared to be limiting economic expansion. The Footsie finished 1.17 per cent lower, closing below the 5,900 level for the first time since last Monday.China raised its fuel prices for the second time in less than six weeks - the world's second-largest oil consumer upped prices by 600 yuan ($95) a metric ton - fuelling fears that higher costs may prove to be a dampener on the economy.Meanwhile, copper inventories at bonded warehouses in Shanghai climbed to 530,000 tonnes last week, according to the median estimate in a Bloomberg News survey of traders and analysts. That compares with the 200,000 tonnes seen in the last three months of 2011. This may be an additional factor behind the selling seen today in copper futures and in miners' shares. INFLATION EASES A LITTLE In domestic news, price rises continued to ease in February, with UK inflation slowing to 3.4% in February, down from 3.6% the month before. However, the drop was slightly less than expected, with analysts hoping it would come in at 3.3%. This will fuel concerns that inflation could prove a tougher nut to crack than expected over the coming months, particularly given current high oil prices. Dr Howard Archer, chief UK Economist at IHS, said that if consumer price inflation did prove to be sticky over the coming months, this would have worrying implications for UK growth prospects. Nevertheless, Barclays Capital analyst Chris Crowe said: "although we remain concerned by the continued evidence of elevated near-term price pressures, February's sharp decline provides some reassurance that the further declines in inflation that we expect are in train." According to the Financial Times, the Office for Budget Responsibility is to revise its UK growth forecasts higher in tomorrow's Budget. Economists expect the OBR to up its GDP growth estimate from 0.7% to 0.8% for 2012. MINERS PLUMMET AS INVESTORS SEEK DEFENSIVESWith fears over a Chinese slow-down already testing investors' nerves, some gloomy remarks from managers at BHP Billiton and Rio Tinto fuelled a sell-off in the mining sector today. Ian Ashby, President of BHP Billiton's iron ore division, told reporters in Australia that "the (Chinese) economy is shifting, it's changing. Steel growth rates will flatten and they have flattened." Similarly, Rio Tinto's Managing Director of expansion projects, David Joyce, also said that the "rate of GDP growth in China is more immediately slowing". Nevertheless, he assured that the company remains confident of a soft landing for the economy. Both BHP Billiton and Rio Tinto were among the worst performing stocks, joined by sector peers Fresnillo, Anglo American, Vedanta, ENRC, Antofagasta, Kazakhmys and Randgold. Commodity marketing and mining giant Glencore International fell by a lesser amount after announcing that it is to spend £3.9bn on the issued and outstanding shares of Viterra, the Canadian agri-business and food ingredients firm. Glencore was down 1.6% before the close, outperforming the wider mining sector, with stocks down an average 3.6%. There were just a dozen or so stocks making gains on the FTSE 100 by the end of today's session with retailers, telecoms and pharmaceuticals stocks rising on the back of their defensive qualities. ING was lifting the supermarket stocks higher after raising the target prices for Tesco, Sainsbury and Morrison. Whilst keeping its ratings unchanged for Sainsbury (sell) and Morrison (buy), the broker upgraded its recommendation for Tesco from sell to hold.FTSE 250: REGUS TANKS DESPITE STRONG PROFITSOffice space provider Regus was down nearly 8% by the close after its full-year profits. Pre-tax profits may have doubled to £45.5m in 2011, but they still weren't enough to meet consensus forecasts of £50.6m. Peel Hunt said that price and occupancy levels are not reported as showing strength ("prices are still not recovering despite occupancy now at good levels") and the outlook statement was not particularly encouraging. "We believe that Regus is bumping along sideways, which would be consistent with the peer group (employment agencies, Adecco in particular). This may hold back sentiment," said analyst Andrew Shepherd-Barron. Meanwhile, oil firm Cairn Energy advanced after it racked up a $1.19bn loss in 2011 but said it was still optimistic about striking it big in Greenland. Department store group Debenhams was in demand after saying that like-for-like sales in the first half of its financial year edged higher, with growth accelerating towards the end of the period. BCFTSE 100 - RisersVodafone Group (VOD) 170.80p +2.06%International Consolidated Airlines Group SA (IAG) 177.70p +1.20%ARM Holdings (ARM) 584.50p +0.78%Morrison (Wm) Supermarkets (MRW) 299.70p +0.60%Tesco (TSCO) 332.75p +0.53%Whitbread (WTB) 1,730.00p +0.52%Sainsbury (J) (SBRY) 305.50p +0.30%GlaxoSmithKline (GSK) 1,433.50p +0.24%AstraZeneca (AZN) 2,863.50p +0.19%Legal & General Group (LGEN) 135.00p +0.15%FTSE 100 - FallersFresnillo (FRES) 1,687.00p -5.01%Rio Tinto (RIO) 3,464.50p -4.15%Anglo American (AAL) 2,505.00p -4.11%BHP Billiton (BLT) 1,965.00p -4.05%Vedanta Resources (VED) 1,361.00p -4.02%IMI (IMI) 965.50p -3.83%Antofagasta (ANTO) 1,201.00p -3.61%Eurasian Natural Resources Corp. (ENRC) 663.50p -3.49%Lloyds Banking Group (LLOY) 36.19p -3.01%Evraz (EVR) 392.70p -2.89%FTSE 250 - RisersCable & Wireless Worldwide (CW.) 38.00p +8.91%Gem Diamonds Ltd. (DI) (GEMD) 300.50p +6.94%Essar Energy (ESSR) 148.90p +5.01%Babcock International Group (BAB) 772.50p +3.90%Cairn Energy (CNE) 341.80p +2.98%Spirit Pub Company (SPRT) 57.50p +2.68%Bwin.party Digital Entertainment (BPTY) 153.20p +1.79%Debenhams (DEB) 76.55p +1.12%COLT Group SA (COLT) 101.20p +1.00%TalkTalk Telecom Group (TALK) 146.20p +0.97%FTSE 250 - FallersExillon Energy (EXI) 188.40p -8.10%Regus (RGU) 104.00p -7.80%Hochschild Mining (HOC) 462.90p -5.24%Bumi (BUMI) 739.00p -4.65%BlackRock World Mining Trust (BRWM) 671.00p -4.42%PayPoint (PAY) 610.00p -4.39%Inchcape (INCH) 376.40p -4.20%Invensys (ISYS) 201.20p -4.10%Kesa Electricals (KESA) 74.20p -3.95%Ophir Energy (OPHR) 424.20p -3.77%