LUXURY goods firm Burberry was one of the hardest hit UK firms yesterday, after China devalued its currency, raising the costs of imports.
The FTSE 100 closed down 1.1 per cent. Weakness in commodity stocks has contributed to recent declines in the index, which is now more than six per cent off April’s record high.
Mining group Glencore led the declines with a 7.3 per cent drop. BHP Billiton, Antofagasta and Rio Tinto fell 3.1 to five per cent.
Copper fell 3.2 per cent after the move by China, which is the world’s biggest consumer of metals.
The mining sector closed down 4.4 per cent, moving back towards a six-year low hit in late July.
Burberry, which sells extensively in China, also fell 4.4 per cent.
The world’s second-largest economy devalued the yuan yesterday after a run of poor economic data, guiding the currency to its lowest point in almost three years in a move that economists said was aimed at helping Chinese exporters.
“A weaker yuan makes imports more expensive, and with China accounting for some 14 per cent of the company’s sales, the implication is clear,” Trustnet Direct analyst Tony Cross said.
Meanwhile, Jonathan Roy, partner at Charles Hanover Investments, added: “I think we’ve seen a bit of an overreaction today, but for those long-term investors that are looking at the bigger picture trying to continue their course, it’s very difficult to put a time scale on it.”
On the upside, Prudential reversed an early fall to climb 4.7 per cent after posting a forecast-beating 17 per cent rise in first-half operating profit.
“All of the key financial metrics were ahead of both our and the market’s expectations, highlighting the strength of Pru’s positioning across the main financial markets in the US, UK and Asia,” Shore Capital analysts said in a note.
Among mid caps, bookmaker Ladbrokes fell 1.8 per cent on news of a 44 per cent drop in adjusted first-half profit to £24.7m reflecting less betting on football and a string of customer-friendly results.
Its update was in line with guidance, and analysts at Numis said the share price was unlikely to make any significant movement until the Competition and Markets Authority has made clear its stance on Ladbrokes’ proposed merger with rival Coral.