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Lacklustre Chinese figures slow market rally
MARKET BLOG: Markets stall as weak Chinese import data dampen spirits; copper prices rally on infrastructure stimulus hopes.
17.00: Britain’s rising market has stalled as China’s trade balance fell short of expectations, prompting concerns about the country’s economy.
The FTSE 100 slipped 0.03%, or 1.6 points, to 5,793 and the Mid-250 index took on 0.2%, or 34 points, to 11,842.
Weak Chinese data showed imports fell 2.6% in July, as domestic demand dropped, and industrial production remained at a 39-month low.
Stateside markets also slowed as the Dow Jones Industrial Average inched ahead 0.06% to 13,315, the Standard & Poor's 500 index shed 0.05% to 1,437, and the Nasdaq Composite index gave up 0.35% to 3,126.
However, China’s lacklustre figures are spurring hopes of further stimulus from the Chinese government, especially following the announcement of an infrastructure investment programme last week.
The price of three-month copper moved up to $8,109.75 in intraday trade on the London Metal Exchange.
Copper hits four-month high on hopes of Chinese stimulus
15.00: Copper has reached a four-month peak on hopes of more Chinese economic stimulus, as weak commodity imports and disappointing levels of industrial activity raise concerns about the country’s economy.
China’s trade balance dropped dramatically, from a forecast $35 billion to $25 billion, as imports of the metal fell 2.9% in August, coupled with industrial production hitting a 39-month low.
Three-month copper price: Click to enlarge
However, the weaker-than-expected reading boosted hopes that the government may undertake further measures to strengthen the country’s economy, following its announcement of plans to increase infrastructure investment last week.
The price of three-month copper moved up to $8,109.75 per tonne in intraday trade on the London Metal Exchange. ETF Securities has also reported the biggest inflow on record, of $98.3 million, into its Copper ETF (COPA ) in the past week.
Mitchells & Butlers gains as new cheif takes the reins
12.30: Pub and restaurant owner Mitchells & Butlers (MAB.L) added 5.1p, or 1.83%, to 283.6p as Alistair Darby joins the group as chief executive after a lengthy search for new leadership.
Darby was poached by the group, which owns the O’Neill's and All Bar One pub chains, after 15 years at rival Marston's (MARS.L), and will start in the new role on October 8.
His appointment ends a long search for a new chief executive after former head Adam Fowle quit last March following a series of bitter boardroom rows.
Bahamas-based currency trader Joe Lewis has been wrestling for control of the group after building up a 25.8% stake through his investment company Piedmont. Irish business tycoons JP McManus and John Magnier have also vied for control through Elpida, which has a 20.7% holding in the group.
Mitchells & Butlers suspended dividends in June 2008 after making a £60 million loss on interest hedging strategies in 2007.
Analysts at Oriel Securities upgraded the company to ‘buy’ from ‘hold’ on the appointment. Jeffrey Harwood, analyst at Oriel, commented: ‘We have always been impressed with Alistair Darby and expect that he will be able to make a series of improvements at Mitchells & Butlers. These will centre on moves to modernise the company and will build on the steps that have been taken by Bob Ivell, who will now revert to the role of non-executive chairman.
‘There is good scope for the new chief executive to make a number of changes to make the company more attractive to shareholders, including a return to the dividend list.’
FTSE drifts as miners' gains offset falls in defensives
11.00: Another of these QE market paradoxes. Mining stocks are buoyant on hopes that a further decline in Chinese industrial production in August and the poor US jobs data on Friday increase the likelihood of more QE-type stimulation from central banks.
Antofagasta (ANTO.L), Kazakhmys (KAZ.L), Vedanta Resources (VED.L), Fresnillo (FRES.L), Rio Tinto (RIO.L) joined bid target Xstrata (XTA.L) as the top 10 biggest risers with gains of between 2% and 3.7%.
Associated British Foods (ABF.L) shed 1.6% to £12.85 despite a strong trading update as investors took profits in the Primark clothing retail to food products group after a strong run in the shares.
RBS (RBS.L) slipped 1.8% to nearly 249p after the Financial Times reported it faced a fine of between £200 million and £300 million from UK and US regulators over Libor rate fixing.
Barratt Developments (BDEV.L) added 2.6p or 1.5% to 171.70 after reports it plans to resume dividend payments.
Among smaller companies, Chariot Oil & Gas (CHARC.L) slumped 64% or 63p to 35p after it abandoned its Kabeljou well on the Nimrod prospect off the coast of Namibia. The company said preliminary tests showed no commercial hydrocarbons were present. Chief executive Paul Welch said Chariot would discuss the findings with its partners, Petrobras and BP, as other areas remained to be explored in Nimrod.
Analysts said the news was obviously disappointing, but that the share price was shielded from further falls by the presence of 31p per share of cash on the balance sheet.
You can see details of all the other main risers and fallers on our FTSE page.
In Europe the Euronext 100 softened nearly two points to 667.
On currency markets sterling was flat at $1.6006 against the dollar, with the euro 0.22% softer at €0.7984 versus the pound and similarly down to $1.2279 against the dollar.
Gold eased back to $1,734.55 while the price of Brent crude oil rose to $114.52 from $113.38 per barrel.
Glencore: we will pay no more for Xstrata
08.50: Glencore (GLEN.L) has warned Xstrata (XTA.L) shareholders that it will not improve its share offer again although it has softened some of the sourer terms contained in last week’s last-minute compromise.
On Friday the commodities trader said it was considering sweetening its bid to 3.05 shares of its shares for every Xstrata share, up from 2.8. Today it confirmed that level, and said it would not be raised again. ‘The increased merger ratio represents a substantial premium for a company with a 34% shareholder,’ Glencore said in reference to its long-term stake in the world’s fifth-biggest mining giant.
Glencore also said it would stick with the current legal structure of the deal, which requires the support of three-quarters of Xstrata shareholders excluding itself. It had considered switching to a straightforward takeover, which would need a simple majority of investors in favour.
As a result it has also backtracked on a suggestion that its boss, Ivan Glasenberg, would take over the combined group immediately instead of Xstrata boss, Mick Davis. It now says Glasenberg (pictured) will succeed Davis after six months.
Xstrata rose 22.5p or 2.2% to £10.36 with Glencore shedding another 4.5p or 1.2% to 373.5p as the deal, brokered in part by former British prime minister Tony Blair, seemed to bring the £56 billion merger a step nearer.
However, more haggling could remain to be done. Although Standard Life Investments (SL.L) backed the new terms on Friday, rival fund manager Schroders (SDR.L) holds out for more. Richard Buxton, head of equities, told the Sunday Times: ‘The price is absolutely still too low.’
The FTSE 100 got off to a quiet start, trading six points lower at 5,788.
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Look up the shares
- Glencore International PLC (GLEN.L)
- Xstrata PLC (XTA.L)
- Standard Life PLC (SL.L)
- Schroders PLC (SDR.L)
- Antofagasta PLC (ANTO.L)
- Kazakhmys PLC (KAZ.L)
- Vedanta Resources PLC (VED.L)
- Fresnillo PLC (FRES.L)
- Rio Tinto PLC (RIO.L)
- SABMiller PLC (SAB.L)
- Unilever PLC (ULVR.L)
- Tesco PLC (TSCO.L)
- Associated British Foods PLC (ABF.L)
- Royal Bank of Scotland Group PLC (RBS.L)
- Barratt Developments PLC (BDEV.L)
- Chariot Oil and Gas Ltd (CHARC.L)
- Mitchells and Butlers PLC (MAB.L)
- Marston's PLC (MARS.L)
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