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China growth fears hammer mining shares

SIX of the FTSE 100’s top ten fallers yesterday were mining companies as traders took fright from a sharp downwards revision to a leading economic index for China.

Natural resources stocks and cyclical plays plunged as the US Conference Board moved its April indicator for the Asian powerhouse from 1.7 per cent to just 0.3 per cent due to a calculation error. The change crystallised fears over a cooling-off in the Chinese economy, which, together with impending cuts to the country’s subsidies for steel exports and its decision to allow the yuan to appreciate against the dollar, raised question marks over miners’ order books.

Analysts at HSBC said the slowdown in Chinese growth would continue, writing: “Be ready for lower readings of Chinese data in the coming weeks. All leading indicators have been slowing over the past few months.”

Shares in Rio Tinto fell 6.4 per cent. Xstrata was down 6.1 per cent, while Lonmin lost 5.9 per cent and Antofagasta and BHP Billiton dropped 5.8 per cent apiece. Stocks sensitive to changes in the wider economic climate such as Carnival, the cruise liner operator and InterContinental, the hotels chain, also shed value.
Despite short-term gloom over Beijing’s rate of growth, analysts were sanguine about the long-term outlook for the region and its corresponding demand for raw materials.

Subhra Das, an analyst at Credit Suisse, said: “In the long term no one data point is going to make a difference. The Chinese slowdown has been happening for the past few months, and if it continues to slow down it will slow down over a period of time. The trading was sentiment-driven.”

David Buik of BGC Partners said: “When the vibes from China turn negative, the miners go sharply into reverse. However, since the dark days of March 2009, the recovery has been miraculous, so I suppose we can cope.”