Fears of slowdown in China see miners and FTSE tumble

BRITAIN’S top share index fell yesterday, heading for its biggest weekly loss so far this year as signs of slower growth in China, the world’s second-largest economy, weighed on cyclical stocks.

Heavyweight mining shares fell 3.2 per cent after data showed industrial activity in China, the world’s largest consumer of metals, shrank for a fifth straight month in March.

Industrial metals and construction material stocks fell 1.1 per cent and 1.2 per cent, respectively.

“Investors have got more concerned about slowing growth in China,” Jonathan Stubbs, a strategist at Citigroup said.

“The shift in emphasis in China from investment to consumption means there is likely to be less support for rising commodity prices from Chinese demand and that mining companies will have to sweat their assets to enjoy outperformance from here.”

While the sector faced short-term risk, Stubbs said Beijing was likely to intervene to stimulate the economy over the coming months, in a move that would support miners in the medium term.

Still in the mining sector, Randgold was down 12.6 per cent in volume nearly eight times the average on worries over the impact of unrest in Mali, home to some two-thirds of the group’s production and where renegade soldiers say they have seized power in a coup.

It was the top faller on the FTSE 100 index, which shed 46.30 points to close 0.8 per cent lower at 5,845.65, having traded 95 per cent of its 90-day volume average.

“Prices remain supported by their rising 50-day moving average but the failure (to) break out of February’s high calls for caution,” Nicolas Suiffet, a technical analyst at Trading Central said.

“The resistance level at 5,989 (an intra-day high reached on 14 March) remains a significant hurdle; a push above this resistance threshold would open the way to 6,100, a key medium-term resistance level,” he added.

On the downside, Suiffet recommended watching out for the 5,710 mark, which he saw as the short-term stop loss for buyers.

Kingfisher was among top blue-chip gainers, rising 2.5 per cent in volume more than double the average, after Europe’s biggest home improvements retailer reported consensus-beating full-year results and said it was growing more optimistic about the UK market.

Next, Britain’s second-largest fashion retailer, also said it saw better times ahead for consumers as its underlying pretax profit neared the top end of the groups’ forecast range, helping the shares close flat.

“Lower inflation this year means that the UK consumer will see a reversal of the real income shrinkage we have seen in the last few years,” Gerard Lane, an equity strategist at Shore Capital, said.

“It’s not going to be gang busters like in the good old days when people could spend money they didn't have but there is an upside risk on UK spending and valuations are not pricing in this improvement.”

But official data underlined how any recovery in sentiment will be a hard slog, as figures showed another cut in spending last month.

“Disappointing manufacturing data from China, Germany and France suggests that the recent recovery in economic activity...could well be starting to run out of steam,” added CMC Markets analyst Michael Hewson.