Mining stocks under pressure amid fears of reduced demand from China

FTSE: 5,196.84 (–20.79) Mid-250:9,985.45 (–53.22) Small Cap: 2,818.89 (–10.68)

UK STOCKS declined for a second day yesterday, as mining companies retreated on concerns that a slowdown in China’s economy could damp demand for commodities.

The benchmark FTSE 100 Index slipped 0.4 per cent in London.

“Concerns about a possible hard landing for the Chinese economy has weighed on mining stocks,” David Jones, chief marketing strategist at IG Index, wrote in an e-mail. “It is difficult to see a catalyst for further gains in the short term.”

Stocks in London broke ranks with other European markets that rose on better than forecast US economic data. The US economy grew at a 1.3 per cent pace in the second quarter, faster than expected, and initial jobless benefit claims fell to the lowest in five months.

The FTSE 100 swung between gains and losses during the day.

Most global investors predict Chinese growth will slow to less than half the pace sustained since the government began dismantling Mao Zedong’s communist economy three decades ago, a Bloomberg poll indicated.

Mining stocks retreated as copper declined for the ninth day in 10. Rio Tinto, the world’s second-largest mining company, declined 3 per cent to 2,966.5p and Xstrata slipped 3.9 per cent 845.1p.

Antofagasta, a Chilean copper miner, fell 3.2 per cent to 958.5p.

In Peru, the world’s third-largest copper and zinc producer and the second-biggest silver producer, President Ollanta Humala signed a law creating a mining windfall tax that will finance increased public spending.

British banks rose after Germany voted for expanding the scope of the euro region’s rescue fund. Royal Bank of Scotland and Barclays rose 1.7 per cent each to 24.5p and 169.15p, respectively.

BP, Europe’s second-biggest oil producer, fell 2 per cent to 391.8p.

Man, the world’s largest hedge fund, dropped 2.2 per cent to 176p following a 25 per cent plunge on Wednesday when the company said assets under management will drop by 8.5 per cent.

Tate & Lyle, a maker of low-calorie sweetener Splenda, climbed 2.9 per cent to 630.5p after maintaining its forecast for “another year of profitable growth”.

International Consolidated Airlines, the owner of British Airways and Iberia, rose 3.8 per cent to 159.7p. – (Bloomberg)