FTSE weak as miners drop after China data

LONDON (Reuters) - Britain's top share index fell back in early trade on Thursday led by weakness in mining stocks after data showed China's economic momentum slowing, fuelling worries over the outlook for the global economy.

At 0900 GMT, the FTSE 100 index was down 47.17 points, or 0.8 percent, at 5,844.78, having ended flat after a volatile session on Wednesday.

Miners were the biggest drag on the blue chip index, as demand concerns were revived by the HSBC flash purchasing managers index - the earliest indicator of China's industrial activity - which fell back to 48.1 from February's four-month high of 49.6.

Rio Tinto shed 2.3 percent with copper prices dropping 1.6 percent as the China data added to ongoing consumption worries after disappointing U.S. data on Wednesday.

"After the U.S. existing home sales numbers yesterday, news Chinese factory activity shrank again has added to the uncertainty on the global economy, putting pressure particularly on the mining sector," said Mike Mason, trader at Sucden Financial.

Precious metals miner Randgold Resources was the biggest FTSE 100 faller, dropping 13.1 percent, having been a good gainer on Wednesday, with the stock unsettled by news that renegade Malian soldiers had declared they had seized power of the African country in a coup.

Randgold revealed late on Wednesday it had signed a convention with the Malian government for a new mine at the Gounkoto deposit in the country.

Weak energy stocks also weighed, led by BG Group down 0.9 percent, as crude prices fell 1.3 percent, also on worries about possible slowing demand from China, the world's second-biggest oil consumer.

Oil services group Amec was another big blue chip faller, down 2.3 percent as JPMorgan Cazenove downgraded its rating for the firm to "neutral" in a sector review.

RETAIL REVERSAL

News from British retailers was not so favourable on Thursday, after they received a boost on Wednesday from positive results from J Sainsbury, with cautious outlook comment from both Kingfisher and Next disappointing.

DIY stores group Kingfisher shed 0.8 percent as it launched a drive to improve profit margins to help it cope against a tough economic background, as its annual profits beat forecasts with a 20 percent rise.

"All eyes will be on the degree to which common sourcing can drive gross margin improvement. Whilst the 7 percent target is ahead of our expectations, the resulting 300 million pounds uplift in EBIT suggest the sourcing gains are towards the bottom end of our forecasts," Oriel Securities said in a note repeating its "reduce" rating on Kingfisher.

Clothing retailer Next shed 0.7 percent as it said it was being cautious in its budgeting for the 2012-13 year as the outlook is "very uncertain", highlighting concerns over employment, credit availability and the euro zone debt crisis.

British retail sales numbers for February will be released at 0930 GMT, with a headline monthly fall of 0.4 percent forecast, after a 0.9 percent rise in January, giving annualised growth of 2.5 percent, up from 2.0 percent previously.

There were only a few FTSE 100 gainers early on.

Mobile phones group Vodafone was the biggest riser, up 0.8 percent, extending its advance after being upgraded to Goldman Sachs' "conviction buy" list on Wednesday.

United Utilities was also in demand, up 0.3 percent as Britain's largest listed water utility said it was on track to report a good underlying performance for the full year, with sales rising in line with market estimates.

And drugmaker AstraZeneca, up 0.3 percent was supported by an upgrade to "buy" from Liberum Capital.

Source: http://news.yahoo.com/ftse-weak-miners-drop-china-data-093108216.html

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