Sector movers: Miners fall as a stronger dollar dampens metals prices
By Benjamin Chiou
Tue 14 Feb 2012
LONDON (SHARECAST) - Miners were the worst fallers of the day following Moody’s mass downgrade of Eurozone nations.
Ratings agency Moody's Investors Service last night downgraded six European sovereigns, Italy, Malta, Portugal, Slovakia, Slovenia and Spain, "in order to reflect their susceptibility to the growing financial and macroeconomic risks emanating from the euro area crisis and how these risks exacerbate the affected countries' own specific challenges," Moody's said. Moody's also revised its outlook on the Aaa ratings of the UK, Austria and France to negative.
The move pushed the euro lower against the dollar, making greenback-denominated commodities such as copper more expensive. The dollar was also strengthening against the Japanese yen after the Bank of Japan boosted its asset-purchase programme.
As such, Rio Tinto, Xstrata, Vedanta Resources, Kazakhmys, Glencore International and Anglo American were firmly in the red on Tuesday afternoon, all registering losses of at least 2%.
BHP Billiton (-1.2%) and Rio announced this morning that they had approved a major investment to ramp up production at the Escondida copper project in Chile worth over $4.5bn. BHP also announced a 17% increase in the mineral resources and a 25% increase in the ore reserves at Escondida following successful brownfield exploration and accelerated in-fill development drilling programmes.
Mining stocks were also pulling back from their strong performance yesterday on the back of the improving outlook for Greece. This followed Sunday’s parliamentary approval in Athens of the country’s austerity measures needed to secure its next bailout.
Heading the other way were forestry and paper stocks, with sector heavyweight Mondi performing well after a pleasing fourth quarter trading update.
The paper and packaging group said underlying profit for the final three months of the fiscal year is expected to be on a par with the year before.
This follows a third quarter in which underlying profit, at €136m, was well up year-on-year but which was down from the second quarter figure of €175m. For the year as a whole, underlying operating profit is expected to be considerably higher than that of the comparable prior year period.
Separately, Mondi announced this afternoon that its Polish subsidiary, Mondi Świecie, has received regulatory approval to exercise an option to acquire Saturn Management.
Sector peer James Cropper was also making gains today, trading up 0.62%.
Forestry and paper companies have been performing well in 2012, with stocks up an average 15% over the last month.
Top performing sectors so far today
Forestry & Paper 6,031.96 +4.48%
Personal Goods 21,900.50 +1.39%
Electricity 8,076.31 +0.98%
Aerospace and Defence 3,611.28 +0.71%
Oil & Gas Producers 8,874.72 +0.68%
Bottom performing sectors so far today
Mining 22,547.70 -1.62%
Construction & Materials 3,487.06 -1.43%
Banks 3,945.26 -1.00%
Fixed Line Telecommunications 2,437.01 -0.91%
Food & Drug Retailers 3,930.58 -0.83%