(corrects UK mining comment from Liberum in par 8&9 not
Jefferies)
* FTSE 100 down 0.6 percent
* Miners lead faller after weak China PMI
* Oils fall as commodity prices soften
* Imperial Tobacco gains as results reassure
LONDON Sept 20 (Reuters) - Heavyweight miners dragged the
UK's blue chip index lower by midday on Thursday after weak data
from China raised more concerns over earnings in the sector.
By 1054 GMT, the FTSE 100 was down 35.18 points, or
0.6 percent, to 5,853.30, as the index continued to edge away
from 6-month highs which it hit after the U.S. joined Europe in
taking action to stimulate the global economy.
"No one really wants to short the markets with central banks
ready to use so much artillery, but at the minute you are
thinking where is the growth?" Robert Quinn, strategist at
Standard & Poor's IQ, said.
Earnings growth concerns dented the mining sector
, which shed 2.5 percent after China's HSBC
Manufacturing PMI notched up its eleventh straight month of
contraction in another sign that the squeeze on western
consumers is still causing belt tightening.
There was weak PMI data in the euro zone too, which showed
the decline in business steepened unexpectedly in September,
highlighting the lack of confidence companies have in splashing
their cash.
That sentiment has carried through to investors too and is
reflected in volumes on the FTSE 100's index, which were just 24
percent of their 90-day daily average around midday, as big
players such as hedge funds and institutions keep their powder
dry in uncertain markets.
Evraz and Anglo American were among the top
falling miners, down 4 percent and 3.6 percent, respectively,
although volumes were just 50 percent of their 90-day daily
average.
In a note on the large cap miners, Liberum downgraded its
rating on Anglo to "sell" and Rio Tinto to "hold" on
concerns over their earnings outlook.
"Today's investment environment looks in many ways similar
to late 2008; virtually all commodities (bar copper) are into
the cost structure, high cost capacity is being curtailed,
long-dated projects deferred, and synchronised global stimulus
is underway," Liberum said.
The market implied five-year earnings per share compound
annual growth rate for miners in developed Europe is -6.2
percent, compared with global equities on 0.7 percent.
ENERGY WEAK
Energy stocks also eased as the slowdown in
demand from the world's hungriest consumer of commodities helped
weaken oil and metal prices, which will eat into commodity
producers' profits.
The weak oil price, however, provided a boost for those
companies that guzzle gas in large quantities such as the
airlines with International Airlines a big gainer up
1.6 percent.
Elsewhere on the upside, Imperial Tobacco rallied
1.5 percent as the cigarette maker's end-year trading update
reassured investors.
"Imperial's in line FY 2012 trading statement should come as
a relief, given the degree of nervousness ahead of the
statement... The shares continue to trade at (around a) 15
percent discount (EV EBITDA basis) to its International peer
group which given the company's strong cash generation is
undeserved," Panmure Gordon said in a note.
With the UK benchmark already up around 12 percent since
June, investors will probably need a new impetus to push the
market beyond the six-month highs hit last week and towards the
psychologically important 6,000 level.
That could potentially come from China, if the data is weak
enough to galvanise the authorities into fresh economic stimulus
measures.
(editing by Ron Askew)
Source: http://news.yahoo.com/ftse-100-ebbs-lower-china-adds-earnings-worries-111546526--business.html
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