Glencore price hits record low
THE bloodbath in commodities continued unabated with Glencore, the bloodiest of the blue-chip casualties, plunging by up to 14pc during the trading session as commodity prices sank on waning demand from China.
The stock hit a record low of 99.9p, a hefty drop from its 530p listing price in 2011 when the secretive Swiss group was valued at $10bn – and even from its 125p placing price last week:
‘To be taken down to that level was painful,’ said David Buik, of Panmure Gordon.
The former commodity powerhouse has made numerous recent attempts to combat its downward trajectory, including a capital injection and dilution of equity, but with anaemic global growth stalling demand, shares are unlikely to climb in a hurry.
‘Glencore has suffered a complete loss of confidence from investors following the recent dividend cut and equity placing,’ said Credit Suisse analysts, who added to the woe by slashing assumptions for Chinese demand, and cutting commodity prices and earnings estimates across the mining sector. Glencore ended the session 12.65p off at 106.35p.
The Footsie dropped below the psychologically key 6000-point threshold as investors pushed the red button on their metal and mining stocks, unable to predict an end to the slump.
Stalling economic growth, falling demand from China and weak emerging market currencies – where construction projects have been put on ice and there is consequently less need for raw materials – coupled with an uncertain interest rate outlook, have undermined the price of copper, aluminium, nickel and iron ore, while crude oil slid by a further 2pc due to oversupply.
The contagion spread to Wall Street, where the Dow Jones closed down 1.09pc, or 179.72 points, at 16,330.47. The FTSE 100 shed 172.87 points to 5935.84.
Anglo American lost 46.8p to 648.1p after Credit Suisse downgraded it to ‘neutral’ from ‘outperform’ on weak earnings momentum from diamonds and platinum.
Goldmans added to the rout, reiterating a ‘sell’ stance and reducing its price target to 700p citing talk of suspending or cutting the dividend, in addition to lower predicted diamond prices.
Elsewhere, BHP Billiton slumped by 54.5p to 1021.5p and Antofogasta was down 41p to 524.5p.
It was a similar story among mid- cap stocks, led lower by a 25pc fall in Kaz Miner- als to 104.4p, while Vedanta Resources lost 44.9p to 466.6p. Lonmin shed 1.75p to 19p, leading the small cap fallers.
Elsewhere, pharmaceutical shares were under pressure after Hillary Clinton took aim at the sector by pledging to lower the price of prescription drugs and barring biotech companies from attempting to limit the release of cheaper generic versions of medicines.
The reports sent US biotech stocks sharply lower overnight, and pushed Shire down 252p to 4543p and Astra-Zeneca 213.5p off to 4165.5p.
The Democratic presidential candidate intends to cap monthly spending on prescriptions while at the same time promoting cheaper copycat versions of medicines and limiting the industry’s huge spend on consumer-directed advertising.
She also suggests that a set amount of money could be diverted to research and development, instead of advertising.
Orthopaedic devices group Smith & Nephew was a brief riser on speculation that Johnson & Johnson might be eyeing up the group for a possible bid. The shares were down 9p to 1156p by the close of trade. But IG Group provided a shaft of light among mid-cap stocks, gaining more than 2.3pc, or 17.5p, to 752p.
That came after a strong set of first quarter numbers, which showed a 50pc rise in clients dealing for the first time.
Liberium rated the stock a ‘hold’ ahead of anticipated upgrades during the course of 2016, while Numis raised its recommendation on the stock to ‘add’ from ‘hold’.
Meggitt was in focus after announcing its second acquisition in as many months.
The aerospace engineering group intends to buy the composites division of US group EDAC for $340m (£221m) in cash.
‘The postponement of the company’s planned share buy-back suggests a window of opportunity for rapid expansion supported by cheap debt, which may potentially benefit from the delayed rise in US interest rates keeping a lid on the dollar,’ said Philip Barker of Cavendish Corporate Finance. The shares fell 10.4p to 463.9p. ÷ DAIRY Crest said its expectations for the year are unchanged after a strong performance from its Cathedral City brand of Cheddar cheese during the first quarter made up for falling sales of its dairy spreads Clover and Country Life. The sale of its dairies is on track to complete in 2015, prompting Shore Capital analysts to reiterate their £53.5m pre-tax forecast for 2016, including property proceeds. The shares closed down 13p at 612.5p.