FTSE 100 movers: Miners drive down blue chip market

The FTSE 100 had dropped 86.42 points (1.41%) by mid-afternoon Wednesday, down to 6,050.82 points.

Miners were again on the list of risers and fallers for a second day in a row, but this time on the negative side. Anglo American, BHP Billiton, Rio Tinto, Glencore and Antofagasta all made the bottom five, driven down by fears about the volatility in China.

The eastern powerhouse staged an about-face from its dire start to the week, with the Shanghai Composite index gaining 2.25%. It had lost around 7% since the open on Monday, due to concerns about a slowdown in the Chinese economy, a weaker yuan and the impending lift of a no-sell order placed on major shareholders during the summer crash.

Both analysts and traders in the region pointed the finger at China's crack "National Team" for the Wednesday gains. On top of that, there was particularly strong performance in the Chinese resources sector, after Premier Li Keqiang announced the country's leadership was looking at measures to reduce the coal glut.

HSBC faced problems on Wednesday as JPMorgan Cazenove downgraded the bank to 'underweight' from 'neutral'. It believed the it underperforms by comparison to peers due to the increasing probability of worsening credit in emerging markets.

JPM said it saw valuation downside due to the potential for rising inflows of non-performing loans (NPLs) in emerging markets. "We expect a modest increase in impairment with risks to the downside in 2016/17, primarily driven by Asia." Moreover, persistent pressure on revenues is forecast to continue despite rising US interest rates, while JPM saw "little or no growth" to come in the dividends per share (DPS) rate.

Trying to bring the market back up was BAE Systems which was upgraded from ‘outperform’ to ‘top pick’ by RBC Capital Markets, and had its target price raised from 570p to 630p.

The investment bank said in a note on Wednesday that it thinks the tide has turned for US defence spending. “We think investors continue to underestimate the fact that this is BAE's largest end market (~40% of sales), and that its portfolio is well placed to benefit in both shorter cycle (eg USN maintenance) and later cycle (eg F-35, AMPV, ACV) areas of US DoD spending.”

It also believed that investors were overly concerned about the defence spending outlook for Saudi Arabia. “The recently issued Saudi 2016 budget details a number of spending cuts in other areas, but not in defence, which saw actual spending in 2015 come in ahead of forecast. Indications from across the defense industry are that Saudi is continuing to procure defense equipment, shorter cycle areas such as munitions.”

Retailers Marks & Spencer and Next also featured in the risers. Investors will be keeping a close eye on M&S, which is due to update the market on its Christmas trading tomorrow, while Next snuck into the top ten after a rebound from yesterday's losses.

It came after the retailer revealed sales were below expectations but said profits were within the range of guidance after the clothing retailer held back from discounting until Boxing Day. With the mild weather "mainly" to blame, full price retail sales fell 0.5% in the period from 26 October to 24 December, which was short of estimates and distinctly underwhelming compared to the rest of the year.

Full price sales from its Next Directory catalogue were up 2.0%, meaning total sales were up just 0.4%, both well below estimates as the weather was exacerbated by poor stock availability from October onwards as well as the admission that "the online competitive environment is getting tougher".

FTSE 100 - Risers

BAE Systems (BA.) 502.50p 1.72%
Kingfisher (KGF) 332.20p 1.37%
Imperial Tobacco Group (IMT) 3,579.50p 1.14%
Royal Mail (RMG) 442.00p 1.10%
Marks & Spencer Group (MKS) 438.80p 0.87%
Randgold Resources Ltd. (RRS) 4,290.00p 0.78%
Worldpay Group (WI) (WPG) 306.30p 0.69%
RSA Insurance Group (RSA) 417.30p 0.60%
National Grid (NG.) 938.10p 0.51%
Next (NXT) 6,865.00p 0.07%

FTSE 100 - Fallers

Anglo American (AAL) 262.00p -7.49%
BHP Billiton (BLT) 696.00p -6.70%
Rio Tinto (RIO) 1,831.50p -5.57%
Glencore (GLEN) 83.70p -5.17%
Antofagasta (ANTO) 425.30p -4.83%
Standard Chartered (STAN) 509.40p -4.30%
Ashtead Group (AHT) 1,054.00p -3.92%
Prudential (PRU) 1,422.50p -3.62%
Old Mutual (OML) 162.10p -3.40%
HSBC Holdings (HSBA) 505.20p -3.33%