Glencore Leads Mining Stocks Lower on China Concerns -- Update
September 22 2015 - 11:25AM
Dow Jones News
By Alex MacDonald
LONDON--The share price of commodities giant Glencore PLC fell
below GBP1 ($1.55) for the first time ever Tuesday, leading all the
U.K.-listed global mining stocks lower on continued fears that
China's economic slowdown would cause metal prices to tumble
further.
Shares in the Swiss trader and producer Glencore fell to a new
intraday low of 99.6 pence a share, down more than 16% on the day,
making it the worst performer in the U.K.'s FTSE 100 index. The
company's price later climbed above GBP1.
U.K.-listed Anglo American PLC was the second-worst performer,
falling 8.4%, while Anglo-Australian miners BHP Billiton Ltd. and
Rio Tinto PLC ranked among the 10 biggest decliners, each down
about 4.8% and 3.9%, respectively.
Glencore has been the worst performer of U.K.-listed miners this
year as it seeks to reduce its heavy debt burden, among the largest
in the industry, to safeguard its credit ratings. Glencore's shares
are down nearly two thirds since the beginning of the year and are
down more 80% since the company's London share listing in 2011.
The company issued $2.5 billion in new shares last week and
announced a host of cost cuts, asset sales and other measures to
restore investors' faith--to no avail so far, analysts say.
"Glencore has suffered a complete loss of confidence from
investors," Credit Suisse said in a note to clients on Tuesday.
However, the company's stock could rebound, the bank said, if it
delivers on its second-half earnings targets.
Credit Suisse on Tuesday slashed earnings estimates across the
mining sector. Miners have been roiled by a long rout in
commodities prices, with gold, copper and iron ore trading at
multiyear lows in recent weeks. The copper price, Glencore's
largest earnings driver, led the base metals complex lower in
afternoon European trading, falling 2.9% to $5,103 a ton. Meanwhile
the price of zinc, the company's third largest earnings contributor
in the first half of this year after coal, fell to more than
six-year low of $1,640 a ton on Tuesday.
"Until China demand and emerging market currencies find a floor,
it will remain challenging to put an absolute floor on commodity
prices," Credit Suisse said in a note.
The 6.2% drop in the FTSE 350 mining index and 2.4% drop in the
FTSE 100 index extended a pattern of market volatility since the
U.S. Federal Reserve said on Thursday it wasn't raising interest
rates this month. The Fed's decision sparked renewed fears over the
sluggish pace of global growth and has left investors
second-guessing when the first rate move will come.
Credit-ratings firm Moody's Investors Service said on Tuesday
that miners are likely be the hardest hit of any sector in Europe,
the Middle East and Africa as a result of China's economic
slowdown.
It estimates about 20%-30% of EMEA mining output, in terms of
revenue, is exported to China both directly and indirectly, the
highest of all sectors.
Analysts were struggling to explain why Glencore's stock had
fallen so much more than others, except to note that funds are
likely short selling the stock in greater numbers.
"It's too big a move," said Liberum Capital analyst Ben Davis.
"This feels more technically driven than fundamentals
[driven]."
Tommy Stubbington in London contributed to this article.
Write to Alex MacDonald at alex.macdonald@wsj.com
(END) Dow Jones Newswires
September 22, 2015 11:10 ET (15:10 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
BHP (NYSE:BBL)
Historical Stock Chart
From Aug 2024 to Sep 2024
BHP (NYSE:BBL)
Historical Stock Chart
From Sep 2023 to Sep 2024