London open: Stocks little changed but miners drop after China downgrade

London stocks were little changed in early trade as investors sifted through a raft of corporate news and digested a downgrade of China’s credit rating.

At 0840 BST, the FTSE 100 was flat at 7,482.24, while the pound was up 0.1% to 1.2976.

Investors were mulling over news that Moody’s has downgraded China’s credit rating by one notch to A1 from Aa3. The ratings agency - which also changed its outlook on China to stable from negative - said the downgrade reflects expectations that the country’s financial strength would “erode somewhat over the coming years”.

Fixed income strategist Jim Reid at Deutsche Bank said it was the first time Moody’s have cut China’s rating since 1989 and that China’s rating at Moody’s is now level with that of Japan and below other Asia economies of Taiwan and Macau.

But Markus Huber, a trader at City of London Markets, said: “Moody's downgrading China overnight so far has had only a minor impact on markets partially because this move didn't necessarily come as a major surprise.

“Generally there isn't that much news making the rounds at the moment which is one of the reasons why some traders prefer sitting on the sidelines for now.”

Although the downgrade didn’t appear to be having too much of an effect on wider sentiment, it did hit London’s mining stocks, which are heavily dependent on demand from China, with Rio Tinto, BHP Billiton and Antofagasta among the fallers.

In corporate news, Marks & Spencer edged lower after it reported steady sales but a 64% plunge in profit for the year to 1 April after taking a £437.4m hit mainly from changes to its pension scheme, international stores, and UK head office.

Glencore fell as it confirmed it has been in talks with US grain trader Bunge over a potential merger with its agricultural arm, while Babcock lost ground despite reporting a rise in full-year pre-tax profit and revenue and lifting its dividend.

B&Q owner Kingfisher tumbled after it said sales in the first three months of the year declined 0.6%, while commercial laundry group Berendsen fell after reconfirming its 2017 profit forecast and saying the bid from Elis "very significantly undervalues" the company.

Mediclinic was in the red as it posted a 25% jump in full-year pre-tax profit but cautioned that revenues in the Middle East will only rise marginally in the coming year.

On the upside, Severn Trent advanced after analysts at JP Morgan lifted their target price a day after the water company surprisingly lifted its dividend.

ZPG racked up healthy gains as it said first-half revenues rose 22%, while Dixons Carphone rallied as it highlighted a 2% increase in fourth-quarter like-for-like revenue.

Soft drinks producer Britvic was on the front foot as it posted an 11.5% jump in first-half revenue and said it was on track to deliver a full-year performance in line with market expectations.

There are no major UK data due, but investors will be eyeing the release of the latest FOMC minutes at 1900 BST for any clues regarding the timing of the next rate hike.

Market Movers

FTSE 100 (UKX) 7,482.24 -0.04%
FTSE 250 (MCX) 19,921.16 0.01%
techMARK (TASX) 3,594.19 0.17%

FTSE 100 - Risers

Severn Trent (SVT) 2,526.00p 1.41%
BAE Systems (BA.) 649.00p 1.17%
Sage Group (SGE) 708.00p 1.00%
Royal Bank of Scotland Group (RBS) 267.20p 0.87%
Coca-Cola HBC AG (CDI) (CCH) 2,263.00p 0.85%
Burberry Group (BRBY) 1,755.00p 0.80%
WPP (WPP) 1,685.00p 0.72%
GKN (GKN) 350.70p 0.66%
Shire Plc (SHP) 4,740.50p 0.65%
Carnival (CCL) 4,817.00p 0.61%

FTSE 100 - Fallers

Kingfisher (KGF) 339.10p -5.60%
Babcock International Group (BAB) 946.50p -2.37%
Rio Tinto (RIO) 3,117.00p -2.36%
Randgold Resources Ltd. (RRS) 7,125.00p -1.59%
Glencore (GLEN) 287.40p -1.56%
BHP Billiton (BLT) 1,183.00p -1.50%
Antofagasta (ANTO) 801.00p -1.23%
Fresnillo (FRES) 1,564.00p -1.14%
Marks & Spencer Group (MKS) 383.30p -1.13%
Anglo American (AAL) 1,063.50p -1.07%

FTSE 250 - Risers

ZPG Plc (ZPG) 374.70p 4.64%
Dixons Carphone (DC.) 337.70p 3.40%
National Express Group (NEX) 373.60p 2.95%
AO World (AO.) 150.00p 2.32%
Britvic (BVIC) 717.00p 1.99%
SIG (SHI) 147.50p 1.72%
Amec Foster Wheeler (AMFW) 549.50p 1.29%
Daejan Holdings (DJAN) 6,845.00p 1.18%
Fisher (James) & Sons (FSJ) 1,714.00p 1.18%
Pennon Group (PNN) 913.50p 1.11%

FTSE 250 - Fallers

Worldwide Healthcare Trust (WWH) 0.00p -100.00%
Homeserve (HSV) 746.50p -3.99%
Softcat (SCT) 439.50p -3.96%
Hochschild Mining (HOC) 276.10p -3.76%
Go-Ahead Group (GOG) 1,794.00p -3.13%
Ferrexpo (FXPO) 167.60p -2.61%
Kaz Minerals (KAZ) 483.40p -2.50%
Vedanta Resources (VED) 621.50p -2.20%
Petrofac Ltd. (PFC) 619.00p -2.06%
TalkTalk Telecom Group (TALK) 179.70p -1.75%