Blue chips in the UK fell heavily this morning on expectations of a slowdown in China’s economic growth.
Equities faced further pressure from concerns that Ireland’s debt problems are spreading into other troubled eurozone states, primarily Greece, Spain and Portugal, which have seen their credit default swaps rise, limiting their ability to borrow money.
The FTSE 100 stood 1.2% below the opening level in mid morning.
Chipmaker ARM Holdings (LON:ARM) and packaging group Rexam (LON:REX) outperformed the market, rising 2.2% and 1.4% respectively. In an interim management statement for the period from 1 July, Rexam said that its results are in line with its plans with both Beverage Cans and Plastic Packaging businesses performing as expected, while cost reduction remains on track.
Outsourcing group Capita (LON:CPI) and pharmaceutical company AstraZeneca (LON:AZN) also did well, tacking on nearly 1%.
AstraZeneca was boosted by reports that it has hired JPMorgan Chase (NYSE:JPM) to sell its Swedish unit Astra Tech, which could raise it as much as US$2 billion.
Oil and base metal prices slipped this morning after Asian stocks fell sharply on anticipation of further monetary policy tightening by China after its inflation reached 4.4% in October, which is well above the government’s 3% target.
The Shanghai Composite Index tumbled 4% today after South Korea hiked its interest rates by 25 basis points to 2.5%, reinforcing worries that China will follow suit.
Inflation in South Korea accelerated to 4.1% last month.
Further measures to curb inflation in China would most likely slow down the rapid economic growth in the country, which is the world’s second largest energy consumer and the leading importer of raw materials.
Copper and nickel dropped to US$3.87/lb and US$10.24/lb respectively. US light, sweer crude for December delivery declined to US$84.14/barrel.
Copper miner Kazakhmys (LON:KAZ) was the heaviest faller in the FTSE 100 with a 4.2% loss. Sector peers Antofagasta (LON:ANTO), Xstrata (LON:XTA) and Rio Tinto (LON:RIO) shed 3.6%, 3% and 2.7% respectively.
Silver miner Fresnillo (LON:FRES) was down 4%.
Investors are looking to today’s update on the UK’s producer price index.
Hedge fund manager Man Group (LON:EMG) Banks Lloyds (LON:LLOY) and Standard Chartered (LON:STAN) lost nearly 3%.
Stocks in the US pared gains late in Monday’s session with the S&P 500 index and NASDAQ composite closing with small losses, while the Dow Jones Industrial Average (DJIA) managed to stay above the opening level.
Investors cheered yesterday’s update on US retail sales, which showed a gain of 1.2% in October. However, the New York Fed said its Empire State manufacturing index turned negative for the first time since July 2009, slipping from 15.7 in October to -11.1 in November.
Today’s macroeconomic data will include updates on US wholesale inflation, industrial production, ABC consumer confidence index and the National Association of Home Builders’ (NAHB) housing index.