Market report: Miners lose their mettle as output targets tumble

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The market bulls have been betting for some time that the price of copper will eventually rally like other commodities. But they found themselves in a hole today after Antofagasta warned it would dig up less copper than expected this year.

The Chilean miner said annual copper output would be at the lower end of its guidance of between 710,000 tonnes and 740,000 tonnes mainly due to lower grades, causing the shares to tumble 39.77p or 7.4% to 500.73p.

Production for 2017 would be lower still at between 685,000 tonnes and 720,000 tonnes.

Analysts at Liberum said the FTSE 100 company would have to have “a very strong” final quarter just to hit the lower target this year.

Antofagasta becomes the latest mining giant to miss production forecasts for the third quarter, following in the footsteps of BHP Billiton, down 21.5p at 1239.5p, Rio Tinto, off 25p at 2771p, and America’s Freeport-McMoRan. 

Glencore, which slipped 3.8p to 242.35p, reports on third-quarter production next week.

The mining sector’s decline was accompanied by a 49 cent fall in the Brent crude price to $50.30, leaving oil majors BP down 9.75p at 485.4p and Shell 46.5p cheaper at 2136p. 

Oil firms’ pain was airlines’ gain as the prospect of cheaper fuel lifted embattled easyJet by 2.77p to 927.77p and boosted British Airways owner IAG by 6.5p to 408.3p.

The commodities malaise left its mark on the FTSE 100, which dropped 70 points or 1% to 6947.64, with banking shares also out of favour after Lloyds Banking Group’s third-quarter results.

Investors bet on a renaissance for the luxury sector, lifting Burberry 10p at 1470p. The change of heart came after sales from Gucci and Yves Saint Laurent owner Kering blew analyst forecasts out of the water.

Analysts at Goldman Sachs urged clients to steer clear of supermarket shares amid concerns suppliers are hiking prices after the pound’s post-Brexit dive.

They suggested supermarkets such as Tesco, up 2p today at 212.15p, would hold off raising prices in stores, meaning profit margins could be squeezed.

Reports suggest Genel chairman Tony Hayward is preparing to quit the troubled Iraqi oil firm and investors headed for the exit themselves today as the shares tanked 10.75p to 82.25p. 

The company said lower production means annual revenues will be at the lower end of its $200 million to $230 million (£164 million to £188 million) guidance. 

“The delays in revenue from the Kurdistan Regional Government have not helped here,” said Arden Partners’ research director Daniel Slater.

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October 26, 2016 |
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