17.30 (CLOSE): A slump for mining stocks pushed the FTSE 100 Index into negative territory today as investors raised fresh concerns over the health of China’s economy.
The slide came after it was reported that China’s finance ministry had told local governments to quicken the pace of spending on construction projects in order to boost the slowing economy.
The FTSE 100 Index stood 26.8 points lower at 6844.5 as jitters also surfaced over the extent of next week’s expected stimulus measures from the European Central Bank.
Miners weak: After strong gains in May, miners beat a retreat on the final session of the month.
Policymakers are thought likely to cut the ECB’s benchmark interest rate from 0.25 per cent to stimulate lenders that deposit with it into providing finance to businesses and consumers.
They could also consider large-scale bond purchases similar to the quantitative easing schemes employed by the UK and the US – a policy that the ECB has so far resisted.
The economic uncertainty impacted on miners, with Anglo American down by more than 5 per cent or 87.5p to 1457.5p and Rio Tinto off 131.5p at 3057p.
The pound strengthened against the US dollar and euro – at 1.67 and 1.23 respectively – after a raft of surveys pointed to further strong growth in the UK economy.
The CBI said output was surging ahead at its strongest rate since at least 2003, while the British Chambers of Commerce upgraded its growth forecast for this year from 2.8 per cent to 3.1 per cent.
And research company GfK said its consumer confidence index had climbed out of negative territory for the first time in nine years.
On the FTSE 100 risers board, medical equipment firm Smith & Nephew continued to improve despite an earlier denial from US rival Stryker about a potential takeover swoop.
Shares rose nearly 4 per cent on Thursday and were up by another 2 per cent or 17p to 1046p, giving the UK firm a market value of around £9.4billion.
Pub company Mitchells & Butlers was 1.5 per cent higher in the FTSE 250 Index amid speculation that it is set to consider the resumption of dividend payments.
The Times newspaper said the potential pay-out would not be jeopardised by the company’s planned £250 million acquisition of the Orchid pub company.
Shares were 6.1p higher at 420.8p in a session when other leisure-based firms also did well. Premier Inn owner Whitbread improved 48p to 4186p, while betting shop firm Ladbrokes was up 2.2p to 152.6p.
Conveyor belt manufacturer Fenner was the biggest faller in the FTSE 250 Index after it issued a profits warning on the back of weak trading conditions in the US coal industry.
Shares dived 10 per cent or 39.7p to 350p as it said it expects profits will be reduced by 10-15 per cent relative to the current market consensus forecast of £77.6million.
The biggest FTSE 100 risers were Admiral up 30p at 1458p, Smith & Nephew ahead 17p at 1046p, Sainsbury’s up 5.5p at 346.1p and Marks & Spencer ahead 6.4p at 449.2p.
The biggest fallers were Anglo American down 87.5p at 1457.5p, Rio Tinto off 131.5p at 3057p, BHP Billiton down 72.5p at 1868p and Fresnillo off 29p at 806p.
15.00: The Footsie extended its falls in late afternoon trade as Wall Street also beat a retreat on the final session of the month, with investors booking some strong gains registered in May.
With an hour and a half of trading to go, the FTSE 100 index was down 24.7 points at 6,846.4, its low for the day after registering gains in the previous three sessions of the week.
US stock opened lower, with the blue chip Dow Jones Industrial Average down 33.2 points at 16,665.0, the broader S&P 500 index off 1.7 points at 1,918.3, and the tech-laden Nasdaq composite index 6.1 points lower at 4,241.5.
In retreat: US stocks took a breather on the final session of a hectic month, helping drag the Footsie back to session lows.
But the main US benchmarks were also still on track to record weekly and monthly gains. Advances in May sent the S&P 500 to record levels above 1,900 for the first time, while both the Nasdaq and Dow Jones turned positive for the year.
Investors had another mixed batch of US economic data to digest. Personal spending data showed US consumers cut back on purchases and spent less on services in April, while inflation pressures continued to build.
The University of Michigan/Thomson consumer sentiment fell to a final May reading of 81.9 from a final April level of 84.1, against forecasts for an increase to 82.5, compared with a preliminary reading for the month of 81.8.
But the Chicago PMI index reading accelerated to 65.5 in May, up from 63.0 in April, its highest level since October.
13.00: Weakness in heavyweight mining stocks was the main drag on the Footsie at lunchtime with the sector knocked by fresh concerns over the economic health of top metals consumer China.
By mid session, the FTSE 100 Index was 10.6 points lower at 6,860.7, retreating on the last session of the month after three days of gains.
Miners suffered after China’s finance ministry reportedly told local governments to quicken the pace of spending on construction projects in order to boost the country’s slowing economy. Anglo American shed 46.5p to 1,498.5p and Rio Tinto lost 85.5p at 3,103p.
May good: The FTSE 100 index is up around 80 points or 1.1 per cent in May despite today’s decline.
Another hit to sentiment for the mining industry came after engineering group Fenner, which makes giant conveyor belts used by the industry, issued a profit warning.
Brokers Investec and Numis Securities both downgraded ratings for Fenner in reaction to the warning, with the mid cap stock dropping 48.1p to 342.0p.
On currency markets, the pound strengthened against the US dollar and euro after a raft of surveys pointed to further strong growth in the UK economy.
The CBI said output was surging ahead at its strongest rate since at least 2003, while the British Chambers of Commerce upgraded its growth forecast for this year to 3.1 per cent from 2.8 per cent.
And research company GfK said its consumer confidence index had climbed out of negative territory for the first time in nine years.
Investors were also cautiously awaiting Wall Street’s restarts ahead of another batch of US economic data following mixed news on GDP growth and jobless claims yesterday.
Joao Monteiro, analyst at Valutrades: ‘Wall Street is looking at a marginally lower start to the day’s trade although we do have a raft of economic readings to contend with including the PCE deflator and the latest Michigan consumer sentiment reading.
‘Any signs of weakness here could well be the ideal trigger to see traders booking some profits ahead of the weekend break. ‘At the risk of sounding like a broken record, markets are very toppy and a reversion remains a case of “when” not “if”,’ he added.
10.00: The Footsie eased back as the morning session progressed pausing for breath at the end of a hectic month after three days of gains, with weakness in mining stocks the main drag.
By mid morning, the FTSE 100 index was down 12.5 points at 6,858.8, giving back around half of yesterday’s advance but was still ahead almost 80 points, or 1.1 per cent for the month.
The UK blue chip index is just over 90 points shy of its all-time peak of 6,950.6 hit on December 31 1999, having reached its best intra-day level since then of 6,894.88 on May 14.
Miners weak: After strong gains in May, miners beat a retreat on the final session of the month.
Blue chip mining stocks were trading firmly in the red, with Anglo American down 51p at 1,494p and Rio Tinto off 75p at 3,113p as worries resurfaced about the health of China’s economy after Beijing called on local governments to speed up their spending over the next month to boost activity. China is the world’s top consumer of metals.
Another hit to sentiment for the mining industry came after engineering group Fenner, which makes conveyor belts for resource companies issued a profit warning.
The group said annual profits would be 10-15 per cent below market expectations on the back of weakness in the US coal industry, causing its shares to drop 48.1p to 342.0p.
Back with the blue chips, DIY retailer Kingfisher remained under pressure after a disappointing first quarter trading update yesterday, losing another 5.0p to 392.0p as broker Barclays downgraded its rating for the B&Q owner to equalweight from overweight.
But on the upside, medical equipment firm Smith & Nephew continued to rise despite Wednesday’s denial from US rival Stryker about a potential takeover swoop.
S&N shares rose around 4 per cent on both Thursday and Wednesday and were up by another 6p to 1,035p, giving the UK firm a market value of around £9.2billion.
Drugmaker GlaxoSmithKline also edged higher, up 0.1p to 1,616.6p on rumours that it has approached a number of private equity firms to gauge the interest for a range of its older drugs as it attempts to refresh its portfolio.
According to various reports, the pharmaceutical group has contacted companies including Advent International, Blackstone and KKR regarding a £7.5billion portfolio of mature products.
On the second line, pub company Mitchells & Butlers added 9.5p at 424.2p amid speculation that it is set to consider the resumption of dividend payments.
The Times newspaper said the return would not be jeopardised by the company’s planned £250million acquisition of the Orchid pub company.
And betting shop firm Ladbrokes was up 2.3p to 152.7p, extending yesterday’s rise on rumours of possible private equity interest in the group, reported in the Daily Mail’s Market Report.
08.15: The Footsie eased back in opening deals as recent enthusiasm waned at the end of a strong month, with miners leading the retreat after recent gains on the back of hopes for economic stimulus measures from top metals consumer China.
In early trade, the FTSE 100 index was down 9.2 points at 6,862.1 having closed 20.07 points higher yesterday when takeover speculation surrounding firms such as Smith & Nephew and Weir Group boosted investor appetite.
Asian shares edged higher on Friday, carrying on Wall Street’s good showing overnight, with the S&P 500 index posting its third record closing high in four sessions as investors shrugged aside the first quarterly contraction of the US economy in three years and focused on signs of a strengthening jobs market.
In the red: The FTSE 100 index was in retreat early on as profit takers moved in a the end of a strong month.
News that UK consumer confidence hit its highest level in more than nine years this month, according to a survey, spooked some investors as it raised some questions about how much longer the Bank of England will keep interest rates on hold.
Polling company GfK said its monthly consumer confidence index rose to zero in May from -3 in April. This was its highest level since April 2005 and beat economists’ forecasts for an increase to -2.
But countering this was a survey showing UK house prices rose more slowly in May than in April across England and Wales, according to property analysts Hometrack, offering another sign that Britain’s housing market may be starting to cool, lessening the pressure on the Bank to act.
Retiring BoE deputy governor Charlie Bean said in an interview with the Western Mail newspaper that raising interest rates in small increments when the time comes could reduce the risk of the bank making a mistake, mirroring similar comments from fellow policymaker Martin Weale in an interview with the Financial Times yesterday.
Markus Huber, senior sales trader/senior analyst at Peregrine & Black said: ‘ With the month of May coming to a close today what trading is concerned and having been rather uncharacteristically a fairly good month for most stocks some profit taking wouldn’t come as too much of a surprise.
‘However overall sentiment remains positive with traders continue to wait for the ECB meeting next Thursday,’ he added.
Stocks to watch include:
ASTRAZENECA – After thwarting a $ 118billion takeover approach from US firm Pfizer this month, AstraZeneca will again take the spotlight this weekend when the biggest annual medical meeting for cancer doctors convenes in Chicago.
LADBROKES – Shares in the betting shop group rose yesterday, with the Daily Mail’s market report citing ongoing rumours of a private-equity consortium bid led by CVC Capital.
IMI – Shares in the engineer rose yesterday as talk did the rounds that its service division might appeal to blue chip Weir Group in the wake of the latter’s failure to buy Metso of Finland, the Financial Times’ market report said.
FENNER – The maker of conveyor belts for the mining industry warned it might miss market expectations for full-year profit due to weakness in the US coal sector and its failure to clinch an Australian iron ore contract.