Market report: Rio Tinto falls short as Chinese growth slows

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Investors dumped shares in Rio Tinto as the mining giant missed second-quarter production forecasts.

Shares in Rio fell 101p, or 4%, to 2361.5p on the FTSE 100 as it revealed iron ore production came in below analyst estimates.

Rio produced 80.9 million tonnes of iron ore over the past three months and shipped 82.2 million tonnes, 8% and 9% below expectations, in a further sign of China’s slowing growth. 

Iron ore is used in steelmaking, among other industrial applications, and shipments are seen as a barometer of demand from China, the world’s biggest importer of iron ore, which is used to fuel its economic growth.

It is the first time Rio’s new chief executive Jean-Sébastien Jacques has been in the spotlight, having officially taken over from Sam Walsh earlier this month.

Analyst Nick Hatch at Canaccord Genuity called it “a disappointing performance” for Rio’s key commodities, iron ore and copper.

Its giant Escondida copper mine in Chile’s Atacama desert, a joint venture with fellow Anglo-Aussie miner BHP Billiton, also suffered from continued lower grades.

The performance cast a shadow over the whole sector, dragging Glencore down 7.1p to 179.3p, Anglo American 27.1p to 804.9p and BHP 29.2p to 947.6p.

The sector caused the FTSE 100 to retreat 25.40 points to 6670.02 as investors lost their appetite for riskier investments, propelling defensive stocks back to the top of the blue-chip leaderboard.

“The ‘wall of worry’ appears to be getting bigger, with investors trimming some positions after a good run that has seen some markets hit new all-time highs,” said Chris Beauchamp, IG’s senior market analyst, who said the unrest in Turkey is concerning investors.

Shares in soft drinks bottler Coca-Cola HBC fizzed 29.6p higher to 1550.6p as JPMorgan Cazenove upgraded the stock to overweight, suggesting soft drinks are more immune to macro-economic volatility than beer or spirits. 

Embattled Gulf Keystone Petroleum, 1.87p better off at 7.47p, continued to rally after last Thursday’s debt restructuring deal which, although massively dilutive, has saved the company from going under.

Sources said that the $200 million share placing from another struggling London-listed oil firm, San Leon Energy, is due to close today, with the funds to be used to buy back loan notes from Toscafund in a complex deal allowing San Leon to buy into a Nigerian oilfield. The shares are still suspended.

The £15 million placing of Funding Circle SME Income Fund, the listed fund of the London-based peer-to-peer lender, also closed today. The stock was unmoved at 98p.

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July 19, 2016 |
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