FTSE 100 hits new five-month low on China jitters

Mon Jun 24, 2013 4:36am EDT

* FTSE 100 index falls 0.2 percent

* Kazakhmys down on plans to back a bid for ENRC

* Vodafone agrees to buy Kabel Deutschland

By Atul Prakash

LONDON, June 24 (Reuters) - Britain's top share index slipped to a new five-month low in choppy trading on Monday, as concerns about the scaling back of U.S. stimulus measures and China's banking sector kept investors cautious.

At 0821 GMT, the blue-chip FTSE 100 index was down 11.62 points, or 0.2 percent, at 6,104.5 points after falling to 6,103.39, the lowest since January. On Friday, it recorded its fifth consecutive week of losses and is now down more than 11 percent since a 13-year peak in late May.

Miners were the worst hit, down 1.2 percent on worries a liquidity squeeze in China may curb metals demand already hit by slower growth. Goldman Sachs cut its China growth forecast for 2013 to 7.4 percent from 7.8 percent on soft cyclical signals and recent tightening of financial conditions.

"As if the Fed wasn't bad enough, now the PBOC (People's Bank of China) are stifling (an) equities rally over concerns on metals consumption," said Tom Robertson, senior trader at Accendo Markets. "In the near term, continued concerns of quantitative easing tapering could continue to hamper sentiment and equities have potential to decline further."

China's central bank asked commercial banks to improve the ways they manage liquidity. Interest rates for short-term funds spiked to extraordinary levels last week as big banks held back on lending in the interbank market.

The mining sector also came under pressure following a 10 percent drop in Kazakhmys after the board of the miner, the single largest shareholder in ENRC, said it will back a buyout bid for its troubled rival.

The trio of founders behind ENRC confirmed a buyout bid valuing the group at more than 3 billion pounds ($4.7 billion). ENRC shares were flat.

Vodafone said it had agreed to buy Germany's largest cable operator Kabel Deutschland for 7.7 billion euros. Vodafone opened lower before recovering to 0.9 percent.

"Vodafone puts itself in front of a bidding war with Liberty Global who last week tabled an offer for Kabel too. But this fight could come to an early end if the deal between Vodafone and Kabel is completed," said ETX Capital strategist Ishaq Siddiqi.

Rio Tinto fell 1.5 percent after saying it has scrapped the proposed sale of its $1.3 billion diamonds business, a setback for its plan to sell a number of mines.

Charts showed the near term outlook for the FTSE 100 index remained negative. It fell below its 200-day moving average, but could find some support at its 61.8 percent retracement of a rally from November to May. (Editing by Catherine Evans)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.