The UK’s main index ended the day significantly lower as miners, particularly Glencore (LON:GLEN) dragged the index down.
David Madden at IG said: “The mining industry is on shaky ground after Investec warned Anglo American and Glencore that their value would vaporize until radical restructuring was implemented.”
The Investec note said: “The challenging environment for mining companies leads us to the question of how much value will be left for equity holders if commodity prices do not improve.”
Anglo American (LON:AAL) fell a whopping 62p, around 10%, to 552p but Glencore led all the fallers, dropping just shy of 20% to 78p.
The miners were also battered by weak Chinese data, which showed the economy expanded at the slowest pace since 1990.
China’s industrial profits dropped 8.8% last month, as the world’s biggest consumer of commodities struggled with excess capacity, sluggish investment and weaker manufacturing.
Meanwhile, SP Angel mining analyst John Meyer suggested the rash of selling could be more to do with the Saudi Arabian Sovereign Wealth Fund, which last week informed Blackrock and other funds of further redemptions in Glencore.
Away from the miners, oil prices were also down, with Brent crude leaking 2.3% to US$47.4 and West Texas Intermediate dropping 2.4% to US$44.6. Shares in BP (LON:BP.) were 10p, or 3% off at 323p and Royal Dutch Shell (LON:RDSB) dipped 42p, or 2.7% to 1,514p.
As a result, the FTSE 100 ended the day around some 2.5% lower, 150 points, at 5,958.
Things were no better in the US, where the Dow Jones index was down 194 points at 16,121 after 45 minutes of trading; the S&P 500 was off 22 points at 1,909 and the Nasdaq Composite was 66 points weaker at 4,620.
On the corporate front in the UK, talk that Belgium's Anheuser-Busch InBev could bid about US$106bn for SABMiller (LON:SAB) within days lifted shares in the latter by 78p to 3,665p.
Away from the index, Speedy Hire (LON:SDY) headed 15.5% lower to 31p after the plant hire group warned on profits after a tough start to its financial year.
Scooter maker Vmoto (LON:VMT) raced ahead 14.3% to 15p as it did a deal to sell 32,000 of its scooters to a Canadian group.
Tanfield (LON:TAN) had less encouraging news as it said US vehicle partner Smith Electric faces possible bankruptcy.
Smith is struggling to raise the required US$4.5mln it needs from its latest fundraising, sending Tanfield’s shares 13.3% lower to 15.8p.
Elsewhere, Lead All Investments (LON:LEAL) said losses narrowed in the first half to £21,463 from £137,382 as it remains on the lookout for investment opportunities in Malaysia. Shares jumped 55%, or 2.5p to 7p.
Conversely, e-ServGlobal (LON:ESG) said there is a chance its sales and underlying earnings (EBITDA) will be below expectations for the year to October 31 due to contract delays and further funding needed at its HomeSend joint venture. Shares lost 30.4% to 8p.
Lunchtime Report
Top flight shares extended their losses on Monday as miners dropped and downbeat Chinese economic data hit sentiment.
The FTSE 100 Index fell 88.09 points to 6020 at lunchtime after Chinese industrial profits declined at their fastest annual pace in August since records began four years ago.
Industrial profits of the world’s second-largest economy fell by 8.8% last month, according to official figures and are down 1.9% for the year to date.
The news hit miners with Glencore (LON:GLEN) backtracking 18.8p to 78.38p, Rio Tinto (LON:RIO) dropping 87p to 2130p, Anglo American (LON:AAL) subsiding 44.1p to 570.6p, Antofagasta (LON:ANTO) reversing 15p to 491p and BHP Billiton (LON:BLT) falling 44.2p to 981.8p.
Broker Investec said it does not see miners, especially Glencore, providing much shareholder benefit while commodity prices are low.
“The challenging environment for mining companies leads us to the question of how much value will be left for equity holders if commodity prices do not improve,” it said.
Oil prices were also down, with Brent crude leaking 1.8% to US$47.7 and West Texas Intermediate dropping 2% to US$44.8. Shares in BP (LON:BP.) were 5p off at 328.3p and Royal Dutch Shell (LON:RDSB) dipped 20p to 1537p.
The industrial profits were hit by currency devaluation and financial market volatility, which Mike van Dulken at Accendo Markets said was adding to growing worries about China's economic slowdown.
Analysts and economists will look for further evidence of financial distress when China publishes its official manufacturing figures later this week.
“It still remains far from clear how weak or otherwise economic conditions in China are, with Nike’s quarterly results showing some decent numbers in the China region,” said CMC Markets’ chief market analyst, Michael Hewson.
Looking at the broader picture, the market is continuing to digest Janet Yellen’s comments on Thursday signalling a US interest rate hike.
On the corporate front in the UK, talk that Belgium's Anheuser-Busch InBev could bid about $106bn for SABMiller (LON:SAB) within days lifted shares in the latter by 100.5p to 3688.5p.
Shares in Vodafone (LON:VOD) fell 8.4p to 209.25p on news that the mobile phone group had ended asset swap talks with Virgin Media owner Liberty Global.
Speedy Hire (LON:SDY) headed 6p lower to 31p after the plant hire group warned on profits after a tough start to its financial year.
Scooter maker Vmoto (LON:VMT) raced ahead 1.25p to 14.5p as it did a deal to sell 32,000 of its scooters to a Canadian group.
Shares in Berkeley Energy (LON:BKY) gained 0.5p to 21.25p after final results from a drilling programme at its Zona 7 project in Spain produced encouraging uranium grade results.
Amedeo Resources (LON:AMED) said the first order for a mobile jack-up drilling rig remains on schedule to be completed by the end of this year. But it added that the rig market remained difficult and it had not yet obtained any new orders. Its shares fell 2p to 23.5p.
MARKET PREVIEW
The FTSE 100 is expected to open its account for the week in negative territory following a lacklustre showing in Asia and a dull end to the trading week in the US.
Britain’s index of blue-chip stocks will fall around 30 points on open to 6,079.1, according to the spread betting firm IG.
Asia’s stock markets were rattled overnight by yet more gloomy economic data from China.
The industrial profits of the world’s second-largest economy fell by 8.8% last month, according to official figures and are down 1.9% for the year to date.
Analysts and economists will look for further evidence of financial distress when China publishes its official manufacturing figures later this week.
“It still remains far from clear how weak or otherwise economic conditions in China are, with Nike’s quarterly results showing some decent numbers in the China region,” said CMC Markets’ chief market analyst, Michael Hewson.
“However concerns remain about the weakness of the manufacturing sector, where we will get further insight later this week, with the latest Caixin manufacturing and services PMI, numbers for September, alongside the official numbers.”
At 6.30am, the Shanghai Composite was off 0.3%, while Japan’s Nikkei was down 1.2%. Australia and Hong Kong bucked the trend.
Looking at the broader picture, the market is continuing to digest the Janet Yellen’s comments on Thursday signalling an interest rate hike in the US.
Back in Europe, the election of independence candidates in the Catalonia regional election will inevitably lead to calls for a split from the rest of Spain.
Experts say it could lead to more political uncertainty across the continent – while here in the UK it will give the Scottish nationalists a boost.
The City Page…
The Financial Times kicks off with an interesting story on Saudi Arabia, which it reckons has withdrawn around US$70bn from asset managers to plug the growing deficit caused by the collapse in the oil price.
Elsewhere in the same paper, we learn the builder Countryside is hoping to use a good set of full-year results as the springboard for a £1bn cash return early next year.
The FT is also following the Energy Transfer Equity bid of Williams - a deal that will create an oil and gas pipeline company worth about US$59 billion.
It also says Arctic oil will soon start flowing from a €5.6 billion polar platform, the Goliat, owned by Italian national champion Eni.
The Times reveals that Royal Bank of Scotland faces inquiry into ‘falsifying’ client files. It says regulators are to examine claims that it ‘edited’ customer emails, call transcripts and how it presented its “central file” record of correspondence, potentially in breach of data protection laws.
The row over the axing of power station Drax’s £1bn green conversion rumbles on with the company that owns the plant blaming the government and specifically the end to the carbon tax, the Times also reveals.
After Lewis Hamilton’s superb win in Japan there is bad news for the circus they call grand prix in today’s Telegraph. The future of Formula One’s British race is at risk after the boss of the Silverstone race track revealed that it lacks sufficient funding and needs an investor, it says.
The paper also claims embattled supermarket retailer Wm Morrison is in a legal row with a clutch of property developers over a string of supermarket sites that it has pulled out of building.
Finally, the Guardian says the Bank of England is likely to keep interest rates on hold until the middle of next year rather than raising them sooner, following a gloomier outlook for the global economy, according to the economic forecaster CEBR.