Miners suffer sharp sell-off on production cut scepticism

London-listed mining stocks suffered their sharpest sell-off in three months on Thursday.

Anglo American lost 4 per cent to £11.07, BHP Billiton was down 3.5 per cent to £15.38 and Rio Tinto lost 1.3 per cent to £29.67. The FTSE mining index, which had started the week at a two-month high, was down 2.5 per cent.

Investec Securities advised selling into the stocks' recent rally, which had been triggered by Vale, BHP and Fortescue all saying they would be willing to cut iron ore production.

Cuts proposed by three of the big four producers were "cosmetic" and "will have little or no immediate impact on the continuing oversupply in the seaborne iron ore market", Investec said. "In our view, the actions have more to do with reducing capital requirements and/or production from lossmaking operations, than anything akin to supply discipline."

Instead, Investec argued, ore prices had bounced on seasonal restocking following the later than usual start to the lunar new year. Absent a structural change in supply and the bounce was likely to be shortlived, it said.

A choppy wider market left the FTSE 100 lower by 0.7 per cent at 6,886.95, a 46.79 point fall. European bond volatility, rather than the general election, defined the tone for the day.

SABMiller bounced off a three-month low on yet another revival of theories that AB InBev would launch a bid. The story, which was coming via retail investors, was of a potential £50 a share offer backed by Warren Buffett and 3G Capital.

SAB closed 3.6 per cent higher at £35.31, with the bid theory squeezing thin liquidity ahead of the brewer's full-year results due on Wednesday. Competition in Latin America and slow demand in established markets were likely to make for downbeat 2016 guidance, analysts said.

GlaxoSmithKline dropped 4.5 per cent to £14.47 a day after revising its strategic plan, which involved a cut to shareholder cash returns and a reset for longer-term market expectations.

Leading the FTSE risers, Carnival took on 3.7 per cent to £30.11, helped by better than expected results from smaller rival Norwegian Cruise Line.

Just Eat was up 4 per cent to 496.1p, with Citigroup raising its target price to 50p on the back of the website's quarterly order numbers. A valuation of nearly 50 times 2016 earnings "is justified, given the early-stage evolution and strong current earnings growth trajectory", it said.

Telecity jumped 21.7 per cent to £10.95 after US peer Equinix made a £11.45 a share bid, which trumped the data hosting group's plans to merge with InterXion of Holland.

IMI faded 4.3 per cent to £11.87 after the hydraulics specialist cut year-end guidance on challenging market conditions, including project delays at its Critical Engineering division.

DFS Furniture fell 3.2 per cent to 271p on a profit warning from fellow sofa retailer SCS Group, which said election uncertainty had "significantly" affected its customers' confidence to make big-ticket purchases. SCS tumbled 31 per cent to 150p.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation