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Miners lead FTSE 100 lower on US shutdown fears

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Mining stocks found themselves at the bottom of Britain’s blue chip index on Monday after a failure to agree a budget deal in the US left the government looking vulnerable to a shutdown.

Should Congress and the White House still be at loggerheads by midnight, about a third of the US government will close, with around 800,000 federal employees sent home without pay.

Economists reckon a shutdown that lasts a few days will not leave much of a scar, but if it persists for a couple of weeks or more, the world’s largest economy would probably begin to slow down.

The prospect of a shutdown dragged global indices lower, with the Footsie down around 50 points or 0.75% to 6,465.

“Month-end often sees profit-taking,” said Accendo Markets’ Mike van Dulken. 

“But when you add the prospect of the US government being forced into at least a partial shutdown without a budget agreement while economic signals remain mixed, the US debt ceiling about to be revisited and the future of easy US monetary policy uncertain, sentiment takes a knock.”

Miners took the biggest hit from the fears, with silver miner Fresnillo (LON:FRES) down 3.7% and Anglo American (LON:AAL) down 3%.

Rio Tinto (LON:RIO) and Randgold Resources (LON:RRS) also slid, with banks also suffering on Monday.

AstraZeneca (LON:AZN) fared better than most after its ovarian cancer treatment olaparib gained market registration.

Panmure Gordon hailed the news: “What was surprising about today’s approval was that it was achieved following only phase II trials but given the very narrow indication it has been approved for, it should not be viewed as a transformative change.

“Nonetheless, we are warming to the story and any further signs that the company’s personalised medicine strategy is beginning to bear fruit may allow us to look positively towards a turnaround situation.”

Fellow pharma stock Shire (LON:SHP) benefited from an upgrade from JPMorgan, which lifted its rating to ‘overweight’ and target price to £30 a share.

The broker thinks news about its pipeline and cost-cutting will give the share price a shot in the arm.

William Hill (LON:WMH) also thanked a City broker for its share price rise as Deutsche Bank upgraded the shares to ‘buy’.

Miners were also the bottom-feeders on the mid-cap index, with Kazakhmys (LON:KAZ) and Centamin (LON:CEY) down 3.8% and 4.1% respectively.

Housebuilding stocks flourished thanks to bullish note from JPMorgan. Bellway (LON:BWY) and Taylor Wimpey (LON:TW.) were the main beneficiaries, but it was Persimmon (LON:PSN) and Barratt Developments (LON:BDEV), the two biggest housebuilders, that were upgraded to ‘overweight’.

The broker thinks fears about a housing bubble have been overblown and the subsequent share price falls from the housebuilders creates an attractive buying opportunity.

JPM said: “The housebuilders underperformed the market by c.11% in Q3 [third quarter], impacted by worries over the scale of upside and longer-term sustainably of earnings, driven in turn by concerns over eventual interest rate increases, cost inflation and speculation that Help to Buy could be withdrawn; all of which are concerns that we believe to be misplaced.”

Pawnbroker Albemarle & Bond (LON:ABM) slumped 40% on Monday as it unveiled plans to raise £35mln to avoid breaching its debt arrangements.

The company, which has felt the effects of the lower gold price, said it would look to raise funds at 50p a share, having finished yesterday at 129p.

Independent Oil & Gas (LON:IOG) made a good debut on AIM as its shares rose to a premium to their listing price.

IOG is raising an initial £2mln via the initial public offering (IPO), which values the group at £14.2mln. It owns 50% stakes in the Blythe and Skipper fields in the North Sea.

Diamonds were an investor’s best friend on Monday as Sunrise Resources’ (LON:SRES) shares sparkled 16% higher after some positive results from a sampling programme.

It said that a 204 kilogram sample from a recently discovered kimberlite target at the Cue project returned a high diamond count of 1.08 per kilo.

A total of 221 diamonds were recovered, 99% of which were white, colourless or off-white and 98% are transparent translucent.

According to Sunrise, the findings suggest that commercial sized stones are likely to be found in bulk samples.

Meanwhile, Noricum Gold (LON:NMG) shone 20% higher after some encouraging grades at the Rotgulden project in Austria.

Greg Kuenzel, Noricum’s managing director, said: “The latest four drill holes at Rotgulden, totalling 165 metres, include some exceptional grades, the best being an intercept of just over one metre containing over 5 ounces per ton of gold, 807 g/t silver and 8.75 % copper.”


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