Leading shares are heading lower - despite positive signs of a possible Greek bailout deal - as the surprise Chinese devaluation of its currency.
The country’s government depreciated the yuan after a series of weak economic data prompted concerns about its future growth.
The move raised the costs of imports, hitting luxury goods and mining shares. Burberry is the biggest faller in the FTSE 100, down 35p at £15.72. Tony Cross, market analyst at Trustnet Direct, said:
[China’s] economy is clearly on the rocks, the Chinese government is already depreciating the yuan in an attempt to prop up exports, but the market reaction has been largely predictable. Miners are dominating the foot of the index, with the prospect of more iron ore output coming on stream adding to the downside here, but it’s luxury brand Burberry that’s the biggest casualty so far. A weaker yuan makes imports more expensive and with China accounting for some 14% of the company’s sales, the implication is clear.
Among the miners, BHP Billiton has fallen 9p to £12 while Rio Tinto is down 8p at £26.27. But with gold and silver attracting investors for their defensive attributes, Randgold Resources has risen 142p to £40.73 and Fresnillo is up 19p at 668.5p.
But overall the FTSE 100 has fallen 31.17 points to 6705.05.
Hopes of a Greek agreement after months of conflict with its creditors has helped lift Coca-Cola Hellenic Bottling by 10p to £13.34.
Among the mid-caps, Serco is up 2.8p at 128.3p after it reported a fall in half year revenues that was not as bad as expected. But Peel Hunt said:
2015 interims [are] in line and expectations for the full year remain unchanged. Risks for 2015 are now weighted on the upside. We anticipate the shares will rise today. However, the current valuation implies medium-term earnings per share at the top end of the planned outcome. In our view it is imprudent to assume this, especially given the known revenue attrition in 2016 and 2017 and lack of free cash flow generation. We reiterate our sell.
Cineworld has climbed 10.5p to 542.5p after Citigroup started coverage with a buy rating and 720p price target.
Just Retirement has jumped 1.5p to 200.2p after it agreed an all share deal to buy rival Partnership Assurance, up 12p at 166.25p, for £669m.
