August 20, 2013 / 11:26 AM / 4 years ago

Basic material stocks weigh on UK FTSE after gloomy results

* FTSE 100 down 0.6 pct at 6,427.59 pts

* BHP, Glencore Xstrata, CRH lead selloff in material stocks

* Beaufort sees FTSE at 6,300 as investors factor in Fed tightening

By Francesco Canepa

LONDON, Aug 20 (Reuters) - Britain’s top share index fell on Tuesday as a batch of gloomy earnings reports and outlooks fuelled profit-taking on heavyweight material stocks and investors positioned for a scaling back of U.S. stimulus.

Shares in miners BHP Billiton’s and Glencore Xstrata fell 2.6 percent and 2.8 percent respectively as the former unveiled a lower-than-expected profit and the latter wrote down the value of its mining assets due to sliding metal prices.

They led a selloff in the pan-European STOXX 600 Basic Resources index, which some investors saw ripe for profit taking after it rose 16 percent since early July and saw its 12-month forward price/earnings ratio, a key valuation metric, rise to levels not seen since 2010.

Despite the recent rebound, which was fuelled by signs of resurgent economic growth in developed market, mining companies remain under pressure from cooling demand from the world’s top consumer, China.

“At the moment there’s a lot of uncertainty around (China) and people are quite happy to lock in their profits,” Mike Franklin, head of investment strategy at Beaufort Securities, said.

Also weighing on the material sector, which encompasses companies that focus on metals and basic resources, was building supplies company CRH , down 7.6 percent after it cut its full-year earnings outlook.

Material stocks knocked 12 points off the FTSE 100, which was down 38.1 points, or 0.6 percent, at 6,427.59 points at 1058 GMT.

John Wood Group Plc, down 7.6 percent, was the top faller on the index as the energy services company warned that weakening business and project delays would impact earnings growth for the rest of this year and into 2014.

The FTSE has fallen 3.5 percent since the start of the month and Beaufort’s Franklin believes the index could fall to 6,300 in the coming weeks as investors factor in expectations that the U.S. Federal Reserve will start scaling back its asset-purchase programme, which has helped the FTSE rise 22 percent since June 2012.

Traders will be looking for clues at when the programme may be trimmed when minutes of the Fed’s July meeting are published on Wednesday.

“Investors (are running) for cover this morning as the markets price in high probability that the Fed will start to rein in their stimulus programme in September,” Mike McCudden, head of derivatives at Interactive Investor, said.

“On lighter volumes we could be in for some seriously choppy sessions going in to September as investors continue to speculate where the Fed will go from here.” (Additional reporting By Tricia Wright; editing by Ron Askew)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below