Monday, March 04 09:53:55
Heavyweight mining stocks led Britain's blue chip share index lower today after China said it could tighten property controls, potentially stunting the country's demand for raw materials.
Five of the top six fallers on the FTSE 100 were miners, and the sector shed 2.4 percent after China said it could increase required downpayments and loan rates for buyers of second homes in cities where prices are rising too quickly. "The miners are coming off on the back of this China story, as when China tightens something, miners sell off," Will Hedden, sales trader at IG Index, said.
"Property drives their demand over there, so that's been giving us weakness this morning."
Leading the sector - and the index - lower was Anglo-American, which fell 3.7 percent, additionally hit by a downgrade from Nomura. Anglo trades at a price-to-earnings ratio of 14 times despite ongoing labour issues at plants in South Africa.
"AAL is trading a material premium to peers such as BHP Billiton and Rio Tinto," analysts at Nomura said in a note, downgrading Anglo to "reduce" from "neutral".
"While we acknowledge that there is value upside locked within the Anglo American structure, with the level of uncertainty, we question why investors would pay a 25-50 percent premium to companies that should exhibit sustainable growth and have proven reliability in delivery."
By 0900 GMT, the FTSE 100 index was down 27.41 points, or 0.4 percent, at 6,351.19, after rising 0.3 percent on Friday.
Banks also suffered, losing 1.9 percent, led lower by HSBC.
Shares in Europe's biggest bank dropped 2.5 percent in volatile trade after the bank announced pretax profit of $20.6 billion for last year, missing analysts expectations. Although the range of predictions for the bank was wide, investors were mostly disappointed in the result, and its falling share price took 13 points off the FTSE 100 index.
British blue chips stuttered after rising 0.7 percent last week, shrugging off the deadlock in the Italian elections.
However, with weak earnings from the likes of HSBC, continued uncertainty over the political situation in Italy and broad-based spending cuts signed off on by U.S. President Obama on Friday, gains this week could depend on the Bank of England or the European Central Bank signalling a loosening of monetary policy, Hedden said.
Both central banks hold policy meetings on Thursday.
"You're going to be looking for central bank policy to lend a hand this week, otherwise I can't see why people would be looking for the market to move higher, as all of the newsflow is equity negative," Hedden said. (C)Reuters