Slowing Chinese growth hurts mining shares

THE TOP share index ended slightly weaker yesterday, led lower by miners as disappointing Chinese trade data raised fresh concerns about the pace of growth in the world's biggest metals-consuming country.

China, the world's second-largest economy, warned of a “grim” outlook for trade after a surprise fall in June exports, the first drop since January 2012.

The UK mining index, down 1.6 per cent, was the biggest decliner as share prices of miners such as Fresnillo, Vedanta Resources, Randgold Resources and Anglo American fell 1.4 to five per cent on worries that global demand for raw materials might fall.

“The decline in imports, especially for commodities, may pressure metal prices further,” Gerard Lane, equity strategist at Shore Capital, said, referring to a 14 per cent decline in copper prices and a 12 per cent drop in aluminium prices so far this year.

Investors also traded cautiously ahead of the release of the minutes from the latest Federal Reserve meeting and a speech by the Fed Chairman Ben Bernanke, which could provide hints about the central bank's likely move to trim stimulus measures.

The blue-chip FTSE 100 ended 8.12 points, or 0.1 per cent, lower at 6,504.96, after rising in the past two days.

“We've seen a sub eight per cent rally in the FTSE since the June low. We may see some exhaustion, but a pullback presents an opportunity to continue to accumulate,” Mike Jarman, chief market strategist at H2O Markets, said.

Jarman said the housing developers in the UK looked strong in terms of forward earnings as they were getting support from the government. However, gold miners were expected to face another tough quarter following a recent decline in gold prices.

Charts showed the FTSE 100 could face some selling pressure in the near term, but its longer-term outlook remained positive.

“We could see a short-term pull back, although the downside potential seems to be very limited. A monthly close above 6,610 is very important as it would suggest a break of a longer-term falling trendline from its 2000 highs,” Roelof-Jan van den Akker, senior technical analyst at ING Commercial Banking, said.

On the positive side, luxury brand Burberry rose 4.9 per cent after posting a better-than-expected increase in quarterly sales.