Leading shares have slipped back from record highs, with mining shares under pressure after poor Chinese data.
China’s exports fell 15% in March, while imports fell at their fastest rate since the 2009 financial crisis, prompting renewed talk of further central bank stimulus to help boost the flagging economy.
But the worries about the country’s growth has sent commodity companies lower, with BHP Billiton down 29.5p to £14.34, Anglo American 16p lower £10.06 and Antofagasta falling 9.5p to 731p.
The sector has not been helped by a series of downgrades by Citigroup. The bank’s analysts have moved from buy to neutral on BHP, from neutral to sell on Anglo and have cut Antofagasta’s price target from 690p to 630p with a sell rating.
Investec also issued a sell note on BHP ahead of the demerger of some of its assets into a new company, South32:
BHP Billiton’s spin-off of South32 is imminent with the shareholder vote just over three weeks away. Unfortunately, the divestment process has been progressing steadily into an increasingly bearish commodity price market, such that our potential valuation for the spin-off has been in continual decline throughout. With our latest commodity price deck, our earnings outlook for South32 is now flat at best, with growth now dependent on meaningful cost reductions, commodity price appreciation or accretive M&A.
Meanwhile analysts at Bernstein have looked at the prospect of a renewed bid from Rio Tinto, down 32.5p at 2804.5p, from Glencore, off 2.05p at 287.60p:
Last week, Glencore reached the end of the “put-up or shut-up” period that had restricted it from coming back to make a renewed approach to take over Rio Tinto. We return to the subject of “Glentinto” to see how the deal looks six months on.Under the same structural assumptions that we made previously, we still see the deal as accretive for Glencore shareholders at consensus commodity price expectations though the deal is not as attractive as it was six months ago.We still believe that the logic behind the combination is compelling, despite the fact that the deal cannot be justified at spot commodity prices. If Rio falls further on the crashing iron ore price, or the iron ore price recovers, Glencore could pounce.
A bigger than expected slide in both March exports and imports have raised concerns about the prospects of the Chinese economy hitting its 7% GDP target later this week. Not only did we see exports slide 15%, missing expectations of a 10% gain by a large margin, but imports also came in lower, dropping 12.7% outside expectations of a 10% slide.
These data misses raise concerns that not only is the Chinese economy failing to rebalance with demand remaining low, but also the global economy’s demand for Chinese exports is also falling back raising concerns about the state of the global recovery as well.
On a quiet day for corporate news, broker comments are driving many of the share price movements. Publishing group Pearson has lost 37p to £14.34 after Jefferies moved from buy to underperform, saying:
Be it constraints around public spending, controversy surrounding educational change through to the emergence of fundamentally free digital technologies, together with the increasing availability of the highest quality, absolutely free digital content...execution for Pearson as it emerges from restructuring will be tough.
Among the risers, Aviva has added 12p to 567p as a blackout on much broker research while its purchase of Friends Life was completed came to an end. JP Morgan issued an overweight rating, as did Morgan Stanley and Barclays.
Meanwhile Merlin Entertainments celebrated its first day in the FTSE 100 - it has replaced Friends Life - with a 1.6p rise to 456.7p.
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