London midday: Pessimism in the air after Chinese price data

Much weaker than forecast data on consumer prices in China fanned talk in the markets of the economic risks investors were still facing, which in turn weighed on sentiment slightly.

At noon the Footsie was 0.42% lower at 6,268.68.

Perhaps unsurprisingly, miners were at the bottom of the pile on the top flight index, although a downgrade on the sector from Barclays appeared to be the chief reason behind that.

"The last five years have been the worst period of performance since 1966. Looking forward it is hard to see what might pull the the sector out of its tailspin. A demand shock seems unlikely given the state of China's economy, although there are some signs of near-term improvement (money supply (M2), property starts and total social financing). We would have reverted to our Negative call of 2013-14 if it weren’t for the recent pick up in some Chinese data, plus sector positioning)," the team of analysts led by David Butler said in a research note sent to clients.

As of 12:50 three-month copper futures were 0.8% lower to $4,925 per metric tonne on the LME.

Much weaker than expected China CPI prompts talk of further easing

Data released overnight by Chinese authorities said the country’s consumer price index slowed to a 1.3% year-on-year pace in October (consensus: 1.5%), while producer prices fell at a 5.9% clip, as expected.

Those figures also revealed the first month-on-month drop in consumer prices since May, of -0.3%. It was the 44th straight monthly decline for factory gate prices.

Nevertheless, analysts at Capital Economics said they expected the drop in consumer price inflation to be temporary, pointing out that the bulk of the decline was the result of softer food prices, where the pace of gains retreated to 1.9% year-on-year from 2.7% in the month before.

Similarly, the -5.9% drop in factory prices was mainly attributable to falling commodity prices, the think-tank said, whereas the price of domestic goods was holding up much better than expected.

Even so, “the window for further interest rate cuts will remain open for some time yet,” Chang Liu, China economist at Capital Economics said in a research report sent to clients.

Policy error by the Fed?

Musing about the ‘market chatter’ surrounding increased expectations for a first interest rate hike from the US Federal reserve in December, Jim Reid at Deutsche Bank said: “We have a bias to believe that a rate hike now would be a policy error mainly because global growth and inflation are so low that you risk activity tipping over into a recession in say 2017. Clearly a lot can happen between now and then but that's our current thinking.

There was no UK data of note scheduled for release but in the US, the import price index is at 1330 GMT, while wholesale inventories are at 1500 GMT.

Anglo American in the dumps after Barclays downgrade

Barclays downgraded its stance on the European mining sector to ‘neutral’ from ‘positive’, noting that 2015 has been another bad year. The broker pointed out that the last five years have marked the worst performance since 1966 and said it’s hard to see what might pull the sector out of its tailspin. Its target price on Anglo American was slashed to 485p from 625p.

Experian was at the top of the leader board after reporting first half operating earnings (EBITA) of $570m (consensus: $567m), alongside strong cash flow, according to some analysts. The information services company increased its dividend by 2% and hiked its share buy-back programme by $200m to $800m.

Shares of Vodafone shone after the telecommunications company’s first half results beat expectations and it lifted full year guidance.

Broadcaster ITV gained ground after saying it was on track for double digit profit growth for the full year as it posted a strong third quarter book.

National Grid advanced after it announced strong first half earnings growth and confirmed rumours that it has begun to look at potentially selling a majority stake in its gas distribution business and returning the proceeds to shareholders via a likely special dividend.

Plumbing supplier Wolseley slid after its first-quarter update failed to impress, while property developer Land Securities was also under the cosh as its interim net asset value per share missed analysts’ expectations.

Shares in engineering giant Rolls-Royce were on the backfoot after Exane BNP Paribas slashed its price target on the stock to 685p from 840p to reflect an additional pullback in the civil aerospace margin and further pressure on shorter-cycle activities.

Supermarket retailers Morrison and Tesco were hit as Deutsche Bank downgraded its ratings on the stocks, with the latter falling to a ‘hold’ from ‘buy’.

Market Movers

FTSE 100 (UKX) 6,268.68 -0.42%
FTSE 250 (MCX) 17,012.98 -0.58%
techMARK (TASX) 3,073.29 -0.06%

FTSE 100 - Risers

Experian (EXPN) 1,173.00p 6.25%
Vodafone Group (VOD) 224.00p 4.45%
National Grid (NG.) 914.20p 2.03%
Berkeley Group Holdings (The) (BKG) 3,140.00p 1.42%
BT Group (BT.A) 465.60p 1.11%
Randgold Resources Ltd. (RRS) 3,971.00p 0.97%
Pearson (PSON) 828.50p 0.85%
Inmarsat (ISAT) 1,022.00p 0.79%
ITV (ITV) 258.20p 0.55%
Royal Mail (RMG) 446.00p 0.47%

FTSE 100 - Fallers

Anglo American (AAL) 488.65p -5.30%
Wolseley (WOS) 3,615.00p -4.99%
Rolls-Royce Holdings (RR.) 672.50p -3.72%
Tesco (TSCO) 173.20p -3.00%
Land Securities Group (LAND) 1,241.00p -2.90%
Prudential (PRU) 1,505.50p -2.87%
Morrison (Wm) Supermarkets (MRW) 159.40p -2.69%
Burberry Group (BRBY) 1,339.00p -2.55%
Meggitt (MGGT) 375.10p -2.34%
Royal Bank of Scotland Group (RBS) 312.40p -2.25%

FTSE 250 - Risers

DCC (DCC) 5,580.00p 4.20%
Greencore Group (GNC) 328.10p 2.60%
Aveva Group (AVV) 2,055.00p 2.44%
Dignity (DTY) 2,569.00p 2.35%
PayPoint (PAY) 1,012.00p 2.22%
P2P Global Investments C (P2P2) 975.00p 2.09%
Polymetal International (POLY) 584.00p 1.83%
NMC Health (NMC) 767.50p 1.66%
CLS Holdings (CLI) 1,815.00p 1.34%
Woodford Patient Capital Trust (WPCT) 104.20p 1.26%

FTSE 250 - Fallers

Kaz Minerals (KAZ) 91.10p -8.58%
Tullow Oil (TLW) 215.60p -5.48%
Petra Diamonds Ltd.(DI) (PDL) 65.05p -5.31%
Drax Group (DRX) 246.00p -5.06%
BTG (BTG) 519.00p -4.95%
Premier Oil (PMO) 74.00p -4.70%
Tullett Prebon (TLPR) 350.80p -4.21%
Vesuvius (VSVS) 352.20p -3.85%
Zoopla Property Group (WI) (ZPLA) 233.90p -3.35%
Cairn Energy (CNE) 149.50p -3.17%