FTSE falls as China devaluation hits Burberry, mining stocks

LONDON (Reuters) - The FTSE 100 fell on Tuesday, led by mining companies and luxury firm Burberry, after China devalued its currency, raising the costs of imports.

A man walks past the London Stock Exchange in the City of London October 11, 2013. REUTERS/Stefan Wermuth

The world’s second-largest economy devalued the yuan on Tuesday after a run of poor economic data, guiding the currency to its lowest point in almost three years in a move that economists said was aimed at helping its exporters.

Mining group Glencore led the declines with a 7.3 percent drop. BHP Billiton, Antofagasta and Rio Tinto fell 3.1 to 5 percent. Copper fell 3.2 percent after the move by China, which is the world’s biggest consumer of metals.

The mining sector closed down 4.4 percent, moving back towards a six-year low hit in late July.

Burberry, which sells extensively in China, also fell 4.4 percent.

“A weaker yuan makes imports more expensive, and with China accounting for some 14 percent of the company’s sales, the implication is clear,” Trustnet Direct analyst Tony Cross said.

Britain’s FTSE 100 closed down 1.1 percent. Weakness in commodity stocks has contributed to recent declines in the index, which is now more than 6 percent off April’s record high.

“I think we’ve seen a bit of an overreaction today, but for those long-term investors that are looking at the bigger picture trying to continue their course, it’s very difficult to put a time scale on it,” said Jonathan Roy, partner at Charles Hanover Investments.

On the upside, Prudential reversed an early fall to climb 4.7 percent after posting a forecast-beating 17 percent rise in first-half operating profit.

“All of the key financial metrics were ahead of both our and the market’s expectations, highlighting the strength of Pru’s positioning across the main financial markets in the U.S., UK and Asia,” Shore Capital analysts said in a note.

Among mid caps, bookmaker Ladbrokes fell 1.8 percent on news of a 44 percent drop in adjusted first-half profit to 24.7 million pounds, reflecting less betting on football and a string of customer-friendly results. Its update was in line with guidance.

Additional reporting by Kit Rees, Editing by Larry King