European stocks ended sharply lower on Tuesday, brought down by autos tanking, several major mining companies being downgraded and oil prices weighing on investor sentiment.
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Renewed alarm about the fragile state of China’s economy sent mining stocks plunging and wiped £44bn off the value of Britain’s top companies on a day of tumultuous trading in financial markets. The largest companies in the industry have scrapped dividends, cut jobs and sold new shares to preserve profitability as the slump in raw-material prices continues.
Credit Suisse Group cut its price estimates for large diversified miners including Glencore and BHP Billiton.
Such was the selling pressure on Glencore that its shares were suspended twice during the day, at 8.56am and at 1.22pm, when a single order would have put the share price down by 3% or more, according to the London Stock Exchange.
In London, mining stocks were punished on the back of a downgrade by analysts at Credit Suisse relating to the economic slowdown in China and other emerging markets.
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 said.
BHP Billiton said on Tuesday that it was planning to sell hybrid securities to help refinance near-term liabilities.
The stock sank 24 per cent. Luxembourg-based Aperam fell 11%.
Jason Hollands, a managing director at private client investment manager Tilney Bestinvest, said: “Fears about the slowdown in China’s rate of economic expansion remain firmly at the epicentre of equity market weakness as China, the world’s leading manufacturing economy for two decades and a voracious consumer of raw materials, is the key lever in setting demand for commodities”. The oversupply in copper will double to 598,000 tons by 2017 and prices are expected to decline, Nomura Holdings Inc. said in a report dated Monday.
Copper declined 3.1% to $5,105 a metric tonne. Zinc sank as much as 1.8 percent to $1,628 a ton, the lowest in five years. European coal for 2016 dropped below $50 a tonne for the first time.
The biggest fallers on the FTSE 100 Index were Glencore down 12.7p at 106.4p, Johnson Matthey down 204p at 2318p, Antofagasta down 41p at 524.5p and Anglo American down 46.8p at 648.1p.
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“Glencore is a bet on copper, and weakness in metal prices is sending tremors through Glencore’s shareholders”, said Richard Knights, a mining analyst at Liberum Capital in London.
