Commodity-related stocks led Britain's top share index lower on Monday following disappointing data from China, the world's largest consumer of metals, and a continued sell-off of gold and silver. The materials and energy sectors combined to take 30 points off of the blue-chip FTSE 100 index after data showed China's economic recovery unexpectedly slowed in the first quarter.
The Chinese news caught some investors by surprise after a surge in banking liquidity and a rise in export growth fuelled hopes of much stronger numbers, and adds to a string of disappointing economic reports globally. "It's mining and energy stocks dragging the FTSE down today, and the momentum is very bearish," Myrto Sokou, analyst at Sucden Private Financial Clients, said.
"The poor Chinese data this morning comes on top of disappointing jobs data from the United States on Friday, and concerns about a slow down in demand putting commodity stocks under pressure." Miners Rio Tinto and BHP Billiton, which derive around a third of their revenue from China, fell 3.8 percent and each took more than 5 points off the index, with Citi also downgrading its view on the sector. FTSE 350 miners fell 5 percent - the sector's biggest one day slide since November 2011. The most dramatic fallers on the FTSE 100 were precious metal miners, with Fresnillo shedding 15.2 percent and peers Polymetal and Randgold Resources down 13.2 percent and 8.3 percent respectively.
Gold slumped to its worst two-day performance since 1983, while silver, which is Fresnillo's focus, shed 10.4 percent. "Gold broke $1,500 on Friday and $1,400 today, which is weighing on the precious metal stocks such as Fresnillo and Randgold," said Sokou. Fresnillo and Randgold traded 5 and 4 times their 90 day average volume, compared to a quiet day on the broader index which saw volume at just 80 percent of the average.
Gold miners traded at 8.7 times their expected earnings for the next 12 months, a multi-year low, Thomson Reuters StarMine data showed. The falls in materials and energy accounted for the entirety of the fall on the FTSE 100, which closed down 40.79 points, or 0.6 percent, at 6,343.60 points The index found support at the 6,300 level, bouncing off lows as traders cycled into defensive stocks resilient to economic uncertainty.
Heavyweight pharmaceutical GlaxoSmithKline jumped to the top of the FTSE leaderboard in afternoon trade, rising 3.9 percent after the US Supreme Court declined to hear a suit against it over its Avandia diabetes drug. Healthcare stocks added 12 points to the index in all, joining utilities as the only sectors in positive territory. United Utilities gained 2.5 percent after a report that the perennial take-over target had hired Goldman Sachs as advisers. "United Utilities is one of those ever ongoing bid speculation stories that happens when the papers don't have a lot to write about on a Sunday," Joe Rundle, head of trading at ETX Capital, said. "It could get taken out but I don't think it's about to happen."