The FTSE 100 ended down 1.42% to 6,135 points, led by Anglo American and Rio Tinto.
Anglo American’s shares tumbled after saying it will suspend its dividend to investors this year and the next as it announced a “radical” portfolio restructuring and further material costs savings and capex reductions to combat declining commodity prices.
The miner said it will cut its number of assets by 60% as it looks to deliver free cash flow and greater returns through the cycle. In addition, it will consolidate from six to three businesses: De Beers, Industrial Metals and Bulk Commodities.
Rio Tinto was in the red as the miner said 2016 group capital expenditure will be $1bn (£660m) less than forecast at $5bn (£3.3bn) as its cost cutting regime continues.
Fellow miners BHP Billiton, Antofagasta, Glencore and Randgold Resources were also sitting lower on the FTSE as Chinese trade data added to concerns about the slowdown in the world’s second largest economy.
Chinese exports dropped 6.8% in November compared to a year ago, marking the fifth consecutive month of decline. Analysts had predicted a 5% fall.
Imports decreased 8.7% in November, worse than the 11.8% drop expected.
The trade balance narrowed to $54.10bn from $61.64, missing estimates of $64.15bn.
On a brighter note for the market, oil stocks rebounded in afternoon trade with BP and Royal Dutch Shell sitting higher, as crude prices rose.
Oil futures endured a volatile Tuesday, after OPEC rolled over its crude production level, last set at 30m barrels per day, following the conclusion of its oil ministers’ summit in Vienna, Austria late last week.
In wake of the OPEC announcement, both Brent and WTI closed over 3% lower on Friday. The short-term bearishness extended to Monday’s session with Brent down another 4.37% to $41.12 per barrel, and WTI down 4.95% to $37.99 per barrel lurking around six-year lows.
With industry surveys pointing to OPEC’s production level being in the region of 32.1m bpd, well in excess of the cartel’s stated levels, bearish trends remained firmly entrenched well into Tuesday, before a late uptick.
Julian Jessop, head of commodities research at Capital Economics, said, “Brent’s (short-lived) dip below $40 per barrel is a further damning verdict on OPEC’s bungled communications after its meeting last Friday.
“However, it was never likely that the group would agree to cut output to boost prices. Instead, any recovery next year will depend on reductions in non-OPEC supply and on stronger demand. On this basis, while we are lowering our end-2016 forecast for Brent from $60 to $55, we continue to expect oil prices to stage a partial recovery next year.”
Away from the oil market, most metal futures registered late afternoon declines in Europe. At 1635 GMT, three-month delivery contracts of primary aluminium (down 1.6%), nickel (down 1.0%), tin (down 0.1%), lead (down 0.4%) and zinc (down 1.6%) were trading lower on the
London Metal Exchange
The copper contract, still at historic lows, remained under pressure, up 0.4% to $4,589.00 per metric tonne.
Liz Grant, senior account executive at Sucden Financial, said, “LME trading saw price activity mostly lower following disappointing Chinese trade data and lower oil prices and although Chinese copper imports were well up it remained under pressure but still contained in a sideways range broadly $4,515-4,670.
“The afternoon session in London saw prices recover from the earlier lows tracking a slight recovery in oil and as the dollar eased back.”
The Precious metal complex remained under pressure with many traders pricing in a US interest rate hike. COMEX gold futures contract was down 0.30% or $3.20 to $1,072.00 an ounce, while spot gold was 0.19% or $2.04 higher at $1,073.78 an ounce. COMEX silver was down 1.48% or 21 cents to $14.12 an ounce, while spot platinum was down 0.67% or $5.75 to $849.53 an ounce.
Finally, agricultural commodity futures were on a mixed patch in early trading stateside. CBOT corn (down 0.07%), CBOT wheat (down 0.57%) and ICE cocoa (down 2.96%) futures were in negative territory, while ICE cotton (up 0.03%) and CME live cattle (up 0.71%) were trading higher.
The Eurozone economy expanded in line with expectations in the third quarter, bolstered by private consumption and government spending, Eurostat revealed.
Gross domestic product in the 19-country bloc grew 0.3% quarter-on-quarter in the three months to September, down from 0.4% the previous quarter. On a year-on-year basis, GDP grew 1.6%, in line with the previous quarter’s reading and with consensus.
“Growth is likely to pick up again in the first quarter, however, to around 0.4% on our estimates before edging up to 0.4-0.5% in the second half of 2016,” said Clemente De Lucia, Eurozone economist at BNP Paribas.
“We expect growth to average 1.5% in 2016 as a whole – an above-trend but unspectacular pace. “
The UK economy grew 0.6% in the three months to November, according to the National Institute of Economic and Social Research. The estimate on gross domestic product was unchanged from last month’s forecast for growth in the three months to October.
NIESR said the pace of growth puts the Bank of England on the path to raising interest rates in February. The BoE is expected to leave policy unchanged on Thursday.
Meanwhile, UK manufacturing production slid 0.4% month-on-month in October, compared with an upwardly revised 0.9% gain in September and with analysts’ expectations for a 0.2% decline, according to the Office for National Statistics.
Industrial production climbed 0.1% month-on-month in October compared with stagnant growth in the previous month and in line with analysts’ expectations.
Halifax reported a 0.2% decline in UK house prices in November, compared to analysts’ expectations for a 0.2% increase and the previous month’s 1% rise.
Supermarkets gained including J Sainsbury, Tesco and Morrison after a positive note from Bernstein. The broker said that where discount retailer Aldi isn’t able to maintain price leadership , instead ofrunning loss leaders, it is likely to reduce its branded range. “This is good news for the big-four for two reasons: firstly it demonstrates that Aldi will not cut prices forever and secondly it improves one of their major competitive advantages – you can get the brands you love.”
Entertainment One plunged after Peel Hunt downgraded the stock to ‘reduce’ from ‘hold’ and slashed the price target to 200p from 260p.
Animal genetics company Genus was a high riser after saying it has developed the first pigs resistant to porcine reproductive and respiratory syndrome virus (PRRSv), though a long-standing collaboration with the University of Missouri.
Mondi was also a big faller after Bank of America downgraded it to ‘underperform’. It’s the first major rating change for the company from a broke after a series of ‘buy’ and ‘outperform’ reiterated ratings early in November.
The dollar maintained its strong momentum on Monday, posting upticks against major currency crosses with the US Federal Reserve set for a policy meeting on December 15-16.
At 1621 GMT, the dollar rose against the yen by 0.11% changing hands at JPY123.24. Concurrently, the pound fell 0.28% against the dollar exchanging at $1.5069, while the euro fell 0.32% to change hands at $1.0846, inching away from parity against the greenback.
Continuing with major crosses, the greenback rose 0.57% against the Swiss franc exchanging at CHF1.0021, still staying above parity in the dollar’s favour during late European trading. Meanwhile, the pound corrected against the euro fetching €1.3894 down 0.04%, following on from the European Central Bank meeting last week.
Kit Juckes, head of forex at Societe Generale, said, “The currency stars that shone brightest in the years of easy Fed policy are being dragged, one by one, into a black hole. Recession will eventually drag the dollar down too, but not in 2016. Just don’t look down! For now, volatility and more frequent corrections are inevitable.”
“The imminent start of the Fed rate-hiking cycle will be sugar-coated in dovish reassurances about the speed of tightening. The market expects as much, but history warns us that the dollar rallies ahead of the first rate hike and often weakens afterwards. This presents a chance to buy, as monetary policy divergence will still be the big theme of 2016.”
Elsewhere, the dollar also rose significantly against selected commodity-linked currencies; up 1.75% against the Norwegian Krone changing hands at NOK8.6611, alongside upticks of 1.09%, 3.44% and 1.51% against the Canadian dollar, Colombian peso and Mexican peso changing hands at CAD$1.3504, COP$3,312.17 and MXN16.9041 respectively.
Finally, the Australian dollar fell against its US counterpart by 0.94% changing hands at US$0.7270, while the New Zealand dollar fell 1.45% changing hands at US$0.6649.
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