MARKET REPORT: Chinese lockdowns dig mining stocks into a hole

Mining stocks took a beating as the fragile state of the Chinese economy sparked fears of a drop in commodity demand.

Covid-19 restrictions have been reintroduced in several Chinese cities including the tech hub Shenzhen in the south as well as Chengdu in the west and Tianjin in the north, fuelling concerns the country will take longer to emerge from its recent slump.

‘With millions of citizens facing strict curbs on movement it’s feared China’s fragile recovery will go into reverse and August’s dip in factory activity won’t be a blip but instead will linger for much longer,’ said Hargreaves Lansdown analysts Susannah Streeter.

China is one of the largest importers of raw materials such as iron ore and copper, meaning any slowdown in the country’s economy threatens to severely hamper global demand.

Glencore tumbled 6.6 per cent, or 31.3p, to 442p, Endeavour Mining sank 4.9 per cent, or 82p, to 1601p, Fresnillo fell 4.5 per cent, or 31p, to 657.6p, Antofagasta slid 4.6 per cent, or 51p, to 1050p and Anglo American dipped 3.8 per cent, or 105p, to 2678p.

The FTSE 100 slumped 1.9 per cent, or 135.65 points, at 7148.5, its lowest level in over two weeks.

Meanwhile, concerns about the state of the economy at home weighed on the more domestically focused FTSE 250, which dropped 3 per cent, or 570.01 points, to 18,493.74.

The cost-of-living squeeze continues to hang heavy over the market after the Resolution Foundation think-tank warned 3m people will be forced into absolute poverty as the UK faced the deepest living standards squeeze in a century. 

The prospect of a massive hit to consumer spending sent many retailers and hospitality firms into the red. 

Next dropped 0.9 per cent, or 50p, to 5762p, Primark-owner AB Foods fell 1.6 per cent, or 25p, to 1500p, Sainsbury’s slipped 1.7 per cent, or 3.4p, to 200p, Tesco lost 1.8 per cent, or 4.5p, to 244.2p, B&M eased 0.4 per cent, or 1.5p, to 368.4p and Ocado was down 5.8 per cent, or 41.8p, to 684.2p.

Stock Watch – Camellia

Tea, avocado and macadamia grower Camellia hit its lowest level in 13 years after issuing a profit warning for what it said was one of its ‘most difficult years’.

The company had been buffeted by extreme weather conditions in countries where it grows its crops as well as disruption from the pandemic, the war in Ukraine, supply chain delays and industrial unrest. Profits for 2022 were expected to be lower than the previous year. Shares fell 7.3pc, or 425p, to 5400p.

Also on the back foot was Premier Inn-owner Whitbread, which fell 1.6 per cent, or 41p, to 2463p, as well as Burberry (down 3.5 per cent, or 60.5p, to 1687.5p) and Intercontinental Hotels (down 3.1 per cent, or 144p, to 4547p).

On the up side, education group Pearson was one of the top blue-chip risers, jumping 1.2 per cent, or 10.6p, to 873.4p after analysts at JP Morgan reinstated their ‘overweight’ rating on the stock.

The investment bank said the firm was making ‘good progress’ in delivering on its strategy and ‘well placed’ to weather the coming slowdown in the economy.

Property firms had less luck, with both British Land (down 5.7 per cent, or 24.7p, to 406.1p) and Land Securities (down 5.2 per cent, or 33.6p, to 617p) downgraded to ‘hold’ from ‘buy’ by analysts at Panmure Gordon.

Barclays unveiled plans to sell its remaining stake in South African lender Absa, ending its presence in African retail banking after nearly a century.

The banking group has sold the 7.4 per cent stake for £538million but expected to take a £31million loss, suggesting it had suffered a hit from the sale. Barclays shares dropped 1.9 per cent, or 3.1p, to 161.4p.

Advertising giant WPP has snapped up Dutch ecommerce consultancy Newcraft for an undisclosed sum.

The group expected the purchase to strengthen its digital commerce capabilities. WPP shares were down 2.5 per cent, or 18.6p, to 725.8p.

Serco (down 2.5 per cent, or 4.4p, to 170.7p) was also shopping. The outsourcer bought ORS, a provider of immigration services in Switzerland, Germany, Austria and Italy, for £39million.

ORS’s 2000 staff will help expand Serco’s European operations.