FTSE slips over bearish expectation for Chinese data and US corporates

BRITAIN’S blue chip shares slipped yesterday, hampered by profit taking on mining stocks ahead of economic data from China, and as the US corporate earnings season came into focus.

Miners shed 0.7 per cent as investors, gearing up for data out of top metals consumer China in the next two weeks, including fourth-quarter GDP, moved to lock in profits.

The sector had rallied around 16 per cent from a November trough.

Societe Generale, in a note, said it reckons a hard landing in China remains a real risk despite recent signs of economic improvement.

SocGen recommended playing this possibility by selling European miners, as well as the tech hardware and personal goods sectors – which also have high exposure to Asia – while buying into media and food retail stocks.

Investors were also wary as the fourth-quarter US earnings season gets underway.

Anglo American bucked weakness in the sector as investors welcomed news that Australian mining executive Mark Cutifani had been appointed its chief executive.

Anglo shares, which have underperformed the sector by around 20 per cent since the start of last year due to strikes, delays and cost overruns, added 1.4 per cent on the news.

Many analysts hope Cutifani’s appointment will herald a review of the group’s underperforming assets and a restructuring of its portfolio.

The FTSE 100 closed down 10.95 points, or 0.2 per cent, at 6,053.63, extending declines from Monday when it fell for the first time this year.

However, this left the UK benchmark only a touch beneath Friday’s closing level, its highest in nearly two years, with the index having chalked up a 2.6 per cent gain so far this year.

“It’s not a time to book profits given that long-term fundamentals still look incredibly attractive,” Henk Potts, market strategist at Barclays, said.

“Corporate profitability continues to grow, valuations look very cheap, and companies are awash with cash which results in higher dividends and share buybacks, and merger and acquisition activity – all of which create a pretty powerful mix of positivity for equity market investors for 2013.”

Market heavyweight Vodafone helped limit the index’s losses as its shares rose 1.7 per cent to 162.74p.

Vodafone’s partner in its US joint venture, Verizon Wireless, said it would be “feasible” to buy out the British firm’s stake in the business in what would be one of the biggest corporate deals ever.

Verizon Communications chief executive Lowell McAdam told the Wall Street Journal “we have always said we would love to own all of that asset,” which is 55 per cent owned by Verizon and 45 per cent by Vodafone.

“There has been much negative news on Vodafone given the tough outlook for European telecoms ... due to the macro environment, but forward looking we see (it retesting) 191p,” Atif Latif, director of trading at Guardian Stockbrokers, said.

“Should (Verizon Communications) make a move on the 45 per cent stake, we see value on a standalone basis, and with the shares offering a prospective yield of seven per cent coupled with the defensive nature of the company we see the current valuation as undemanding.”

Trading volume in Vodafone was robust, at 164 per cent of its 90-day daily average, against the FTSE 100 index on 95 per cent of its 90-day daily average.