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Footsie ends lower led by Glencore

The FTSE 100, which had been outperforming its European counterparts for much of the day, dropped further in the afternoon to end 1.8% lower at 6,408.

FTSE 100 lower as China concerns weigh
Glencore nestled at the bottom of the index

London Close

London’s blue-chip stocks tumbled after lunch to end the day significantly lower as US stocks joined in today’s global markets sell-off.

Across the pond, The Dow is nursed a triple-digit fall after US inflation figures suggested the climate is right for an interest rate rise.

July’s Consumer Price Index rose a seasonally adjusted 0.1%, the sixth month in a row the index has risen.

A higher interest rate is one of the tools used to keep inflation in check, and pundits suggested the reading made a September rate rise more likely.

Meanwhile, big falls by Asian markets overnight continued to weigh on global markets.

Denis de Jong, managing director of forex trading firm UFX.com. “It seems as though growth in China isn’t as strong as we thought which is a very real concern for the health of the global economy.”

Markets across Europe struggled with the Dax easing 2.1% to 10,685 while the French Cac40 lost 1.7% to 4,887.

The FTSE 100, which had been outperforming its European counterparts for much of the day, dropped further in the afternoon to end 1.8% lower at 6,408.

Nestled at the bottom of the index was Glencore (LON:GLEN) which reported its interim results today.

The shares fell 7% to 163p as the miner and commodity trader blamed the sharp fall in commodity prices for lower profits and said it would cap spending at US$5bn in 2016.

In other mining news, KAZ Minerals (LON:KAZ) was trading higher as the gold price improved, and as shares regained some of the ground lost in recent days.

Interim results are to be released tomorrow and shares rose 6.5% to 155p today.

At the other end of the index, insurer Admiral (LON:ADM) reduced losses in the international business boosted by Conte, its Italian business, which made its first profit.

In the UK, car insurance profit rose 6% while, overall, the firm stated that it had more than 4mln members in the first half. Shares rose 3.9% to 1,523p.

In small caps, Sunrise Resources (LON:SRES) said it will kick-off drilling at its Bay State silver project in Nevada next week. It signed a deal with Boart Longyear to undertake the work.

One drill hole will specifically target an area which recently yielded “bonanza silver grades” in underground sampling. Shares were 35% higher at 0.29p.

Elsewhere, Insurance broker and consultant Jelf (LON:JLF) confirmed it may be the subject of a takeover by global firm Marsh Ltd. Shares surged 11.59% to stand at 231p as the market welcomed the news.

US open

The Dow is nursing a triple-digit fall after US inflation figures suggested the climate is right for an interest rate rise.

July’s Consumer Price Index rose a seasonally adjusted 0.1%, and although the gain was only half as big as economists had expected, it was the sixth month in a row that the index had risen.

A higher interest rate is one of the tools used by central banks to keep inflation in check, so pundits suggested the reading made a rate rise before the end of the year more likely.

We’ll get more clues on the likelihood of that happening later on today, when the minutes from the July meeting of the Federal Open Market Committee are released.

The minutes should provide insight into whether Federal Reserve chairperson Janet Yellen’s view that a rate rise should come this year is shared by other policy makers, many of whom have been sitting on the fence.

“Although US inflation has moved up marginally since last month, the minutes from the Fed’s latest policy meeting later today are going to reveal much more in terms of a potential September interest rate hike,” suggested Denis de Jong, managing director of forex trading firm UFX.com. 

“Everything looked on track for Fed Chair Janet Yellen to press the button but, just as she could see the light at the end of the tunnel, China shocked the world by deciding to depreciate its currency twice in quick succession.

“It seems as though growth in China isn’t as strong as we thought which is a very real concern for the health of the global economy.

“This, combined with continuing disinflationary forces around the world, could be enough to plant a big enough seed of doubt in the minds of Yellen and her Fed colleagues,” de Jong speculated.

The Dow Jones was down 124 at 17,387 after half an hour or so, while S&P 500 shed 15 points at 2,081; the Nasdaq Composite tumbled 38 points to 5,021.

Home improvements chain Lowe’s Cos (NYSE:LOW) defied the trend, rising 0.8%, after a mixed set of results. Earnings came in short of expectations, though sales growth surprised to the upside.

Elsewhere in the retail sector, office equipment and consumables supplier Staples (NASDAQ:SPLS) also came up shy of market forecasts with its second quarter earnings. The shares were off 0.8%. 

Second quarter sales were down 5% on a year earlier, but were up an underlying 1% once the impact of store closures was removed.

Another retailer, Target (NYSE:TGT) was wanted after it raised its earnings outlook for the year on the back of better-than-expected second quarter profits.

The company now expects earnings per share (EPS) for the year to be in the range of US$4.60 to US$4.75, 10 cents higher at both ends than the previously indicated range.

US data storage giant Seagate Technology (NASDAQ:STX) is to buy Dot Hill Systems Corp, a supplier of hardware and software solutions, in a deal worth US$694 million.

The disk drive maker’s shares retreated 79 cents to US$51.30.


Lunchtime Report

London’s blue chip stocks were lower at lunch despite positive news from Greece as China concerns weigh on the market.

With 454 ‘yes’ votes, 113 dissenters and 18 abstainers the German parliament, the Bundestag, passed the third Greek bailout, seeing the deal clear the final major hurdle just in time for Greece’s ECB repayment tomorrow.

“Now all that is left is a successful Dutch vote later today, and a Eurogroup sign-off this evening, and Greece can expect the first €26 billion tranche of its €86 billion package to arrive very soon” Connor Campbell at spread-betting site Spreadex said.

The European markets committed to their falls, despite the successful progress of the German bailout vote, with the German Dax easing 1.2% to 10,787 while the Paris-based Cac40 lost 0.75% to 4,934.

The FTSE 100 Index dropped 66 points, 1%, points to 6,460 as traders worry over the state of the Chinese economy.

Analysts said the large number of Chinese retail investors will have been seriously stung by recent currency devaluation moves and may not be keen to get involved again for now.

“The Chinese equity markets may have ended on a positive note, but the erratic swings should be viewed with caution, and such a wide trading range tells us that China will not be stable for some time” David Madden at IG said.

On the corporate from, the troubled mining sector was under the spotlight as Glencore (LON:GLEN) reported. The shares fell 9.75p to 166.35p as the miner and commodity trader blamed the sharp fall in commodity prices for lower profits and said it would cap spending at US$5bn in 2016.

Sticking with the miners, a report this week suggested that Lonmin’s (LON:LMI) options to refinance its debt next year are getting tougher as the plunge in shares continues to deepen.

Its market cap is now US$163mln while its debt facilities in need of renegotiating next year are around US$563mln. Shares were a further 18.8% lower today to 26.8p.

In better news, Hikma Pharmaceuticals (LON:HIK) pared early losses to gain 86p to 2,486p by lunch as the drug group maintained its full year group revenue guidance at about 2% on a reported basis or 6% at constant currencies and kept its dividend flat despite lower first half revenue and profit.

In small caps, Sunrise Resources (LON:SRES) said it will kick-off drilling at its Bay State silver project in Nevada next week. It signed a deal with Boart Longyear to undertake the work.

One drill hole will specifically target an area which recently yielded “bonanza silver grades” in underground sampling. Shares were 39.5% higher at 0.3p.

Elsewhere, Insurance broker and consultant Jelf (LON:JLF) confirmed it may be the subject of a takeover by global firm Marsh Ltd. Shares surged 11.59% to stand at 231p as the market welcomed the news.


MOST FOLLOWED

Web browsers had a myriad of business news to choose from this morning, with mining giant Glencore (LON:GLEN) UK mortgage terms, Sunrise Resources (LON:SRES) and bank misselling among the topics in focus.

As Footsie eased lower due to macro issues, Glencore was the biggest laggard as it blamed the sharp fall in commodity prices for lower first half profits and said it would cap spending at US$5bn in 2016.

Aluminium and nickel had been particularly affected by a collapse in physical premiums and subdued levels of global stainless steel production.

In the small caps, however Sunrise Resources (LON:SRES) was a standout gainer, up almost 28% as it revealed it will start drilling on its Bay State silver project in Nevada, USA next week, after it signed a contract with Boart Longyear to undertake the work.

Given that access to the drilling sites has already been secured and drill pads put in place, the drilling itself is scheduled to start first thing on Monday August 24.

From mining to mortgages, and in the UK, those looking for a home are increasingly searching for loans with terms of more than 30 years in a bid to keep monthly repayments down, new data showed. It comes as an interest rate rise looks ever more on the cards. A typical term is 25 years.

In  a similar vein to the PPI scandal, big lenders are now in the frame to pay out compensation for duping millions of people into buying insurance they did not need.

It was for insurance to protect them from fraudulent transactions made on cards but they are legally obliged to refund such fraudulent payments anyway.

Around 2mln customers are in line for up to £270 compensation each, it was reported.

Speaking of insurance, in other news, insurance broker Jelf (LON:JLF) saw shares go over 19% as it confirmed that it is in talks with Marsh over a possible cash offer for the business

In other news, IAG's (LON:IAG) €1.4bn takeover of Irish flag carrier Aer Lingus is now unconditional after investors representing 95.77% of Aer Lingus shares accepted its €2.55 euro offer for the company. Therefore, the end is in sight for this long-running saga. IAG shares eased 1.55% in early deals.

In another slice of social media and tech news, which has been prevalent in recent days,  it emerged that the Chinese Internet firm Tencent had taken a US$50mln (£32mln) stake in Canadian start-up mobile message specialist Kik Interactive.

Tencent focuses on Internet products including online sales, social networks and China messenger service WeChat and Kik is hoping the investment will emulate its (WeChat) success in North America.

In a similar vein, India's e-commerce company Snapdeal told investors it had raised US$500mln (£310m) from international investors to expand its online marketplace. The backers include online retail behemoth Aliababa.

eBay, however, which  was an early supporter of Snapdeal, announced it was selling its stake to boost its own business.


LONDON OPEN

London stocks took a dive on Wednesday as further Chinese jitters shook markets.

The FTSE 100 Index dropped 68 points to 6,458 as traders worry over the state of the Chinese economy and wonder whether the Fed will hike interest rates across the pond.

Analysts said the large number of Chinese retail investors will have been seriously stung by recent currency devaluation moves and may not be keen to get involved again for now.

Craig Erlam at City firm OANDA said: "The sell-off also seems to reflect a lack of confidence in the Chinese economy, which is one of the key reasons why commodities are performing so badly at the moment."

Augustin Eden at Accendo Markets said: "China being a global growth barometer, the ripple effects will be felt the world over."

The tumbling market dented Japan's Nikkei 225 index, which lost 268 points to stand at 20,285.

The minutes of last month's Fed policy committee meeting will be published today, which is adding to the mix of unease as it may give a clue that the Fed will start to raise interest rates in September (next month) after not having done so for a decade.

In Europe, optimism over likely German approval of Greece's latest bailout failed to lift Frankfurt's DAX, which tumbled 157 points to 10,758.

On the corporate front, the troubled mining sector was under the spotlight as Glencore (LON:GLEN) reported. The shares fell 9.75p to 166.35p as the miner and commodity trader blamed the sharp fall in commodity prices for lower profits and said it would cap spending at US$5bn in 2016.

Elsewhere, Hikma Pharmaceuticals (LON:HIK) pared early losses to gain 54p to 2,454p as the drug group posted lower half-year revenue and profit but maintained its full-year group revenue guidance.

African Potash (LON:AFPO) fell 0.26p or 19.85% to 1.05p as the miner described a report that it was planning a placement at a significant discount to the current share price as "speculative and unfounded". 

"No such placements are being considered," it said in a statement to the market.


MARKET PREVIEW

FTSE100 is called to open lower on Wednesday after a sell -off in Asian stocks overnight as traders worry over the state of the Chinese economy and are wondering whether the Fed will hike interest rates across the pond.

Such worries led the UK premier share index lower by the tune of 24 points on Tuesday to close at 6,526.

Today, financial spread betters at IG Index are calling it to start around 22 points down at the open.

The Shanghai Composite Index lost 116 points overnight as the sell-off continues and traders lost any hope that the rout could be stabilised after Beijing appeared to pull out all the stops to prevent the plunge.

The tumbling market dented Japan's Nikkei 225 index, which lost 268 points to stand at 20,285.

The minute of last month's Fed policy committee meeting will be published today, which is adding to the mix of unease as it may give a clue that the Fed will start to raise interest rates in September (next month) after not having done so for a decade.

On the corporate front, the troubled mining sector will be under the spotlight as Glencore (LON:GLEN) reports. Elsewhere, Hikma Pharmaceuticals will report for the first time since it acquired Roxane Laboratories, a move which was welcomed by the markets.

Quick facts: Glencore PLC

Price: 226.35 GBX

LSE:GLEN
Market: LSE
Market Cap: £30.16 billion
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