Reuters: Hot Stocks: Miners lead UK FTSE lower on weak China data, gold selloff

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Miners lead UK FTSE lower on weak China data, gold selloff Apr 15th 2013, 08:31 Mon Apr 15, 2013 4:31am EDT * FTSE 100 down 0.4 pct at 6,355.90 pts * Disappointing Chinese data triggers selloff in Rio, BHP * Randgold, Polymetal, Fresnillo hit by gold selloff By Francesco Canepa LONDON, April 15 (Reuters) - Britain's top share index dipped early on Monday as disappointing data from China, the world's largest consumer of metals, and a selloff in gold weighed on mining shares. China's economic recovery unexpectedly slowed in the first quarter, catching some investors by surprise after a surge in banking liquidity and rise in export growth fuelled hopes of much stronger numbers. Miners Rio Tinto and BHP Billiton, which derive around a third of their revenue from China fell 5 percent and 2.7 percent, respectively. The broader materials sector knocked 17.4 points off the FTSE 100, which was down 28.3 points, or 0.4 percent, at 6,355.90 points at 0800 GMT. "I'd go with the trend and sell the diversified miners, the likes of Billiton and Rio," said Ronnie Chopra, head of strategy at Tradenext. Citigroup cut its estimate for the mining sector and revised some of its recommendations and target prices. "We are now back into earnings downgrade phase," the bank said in a note. "It is therefore too early to jump back into the sector and stock selection is critical." Also among top fallers on the FTSE 100 were gold miners Randgold Resources and Fresnillo. Gold prices have dropped to a two-year trough due to fears of sales by central banks. Investors fret a phasing out of asset purchases programmes from central banks, especially the U.S. Federal Reserve, would undermine inflation expectations and drive down the demand for gold, often used by investors to hedge against rising inflation. But Tradenext's Chopra said he would buy gold mining stocks on the dips, expecting renewed demand from Asian buyers and flagging a good entry point into African Barrick Gold as it traded close to its all-time low. "They're coming to prices where there is bound to be some consolidation and if someone wants to be predatory at these low price to earnings ratios there's room for some mergers and acquisitions activity to surprise the market," he said Gold miners traded at 8.7 times their expected earnings for the next 12 months, a multi-year low, Thomson Reuters StarMine data showed. The weak Chinese report also added to broader concerns about global economic growth after a batch of mixed data on the U.S. labour market and signs of a deepening recession in the euro zone. Shares in defensive companies, that are seen as better suited to a low-growth environment, were the best performers on Monday, with utilities and sellers of consumer staples adding 6 points to the FTSE. Among owners of defensive shares was Carmignac Gestion, which was "underweight" European shares in light of weak growth, a funding crisis in Cyprus and political deadlock in Italy. "In Europe, it's defensive stocks that we are invested in," Sandra Crowl, a member of Carmignac's investment committee, which has 57 billion euros under management. The asset manager has also made negative bets, or "shorts", on futures in the Euro STOXX 50 index as a whole to hedge its positions in particular European stocks. Short sellers borrow securities with a view to selling them, betting they will be able to buy them back at a lower price before returning them to the lender. "We have 10 percent hedges on the Euro STOXX against our global equity portfolio," Crowl said. (Additional Reporting by David Brett; editing by Patrick Graham) Link this Share this Digg this Email Reprints

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