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Miners cap FTSE gains as Vale ruling sparks price fears

Miners hold back FTSE 100 as court ruling allows Brazil's Vale to increase iron ore production, sparking price fears

Miners cap FTSE gains as Vale ruling sparks price fears

Miners limited gains on the FTSE 100, following a court decision which would potentially allow Brazilian rival Vale (VALE.SA) to increase iron ore production, while shares in business supply distributor Bunzl (BNZL) fell after a weak first quarter.  

The UK blue-chip index was up just 3 points, or 0.1%, to 7,473 as mining shares were knocked by reports that Vale expected to resume operations at its Brucutu mine within 72 hours.

BHP Group (BHP) fell 3% to £18.50, as the world’s largest miner slashed its iron ore output forecast. This came a day after rival Rio Tinto (RIO) also cut guidance, sending its shares 2.7% lower in this morning's trading.

Bunzl dropped 8% to £23.50 after reporting a decline in quarterly revenue growth. Graham Spooner, investment research analyst at The Share Centre, said: ‘With the shares pre-update close to an all-time high any sign of turbulence was likely to hit the shares hard. Investors may have to put on the company's safety hats for a period of time.'

The FTSE 250 was up 29 points, or 0.1%, to 19,952 but utilities supplier Telecom Plus (TEP) fell 2% to £14.64 after warning that full-year profit would be lower than expected, with fourth quarter revenues knocked by a price cap from the British energy regulator.

Mediclinic (MDC) shares rose 9% to 332p as the private hospital group said  annual profit would meet expectations.

Pendragon (PDG) was a 'small-cap' faller, tumbling 7% to 23p, as the car dealer set out to review its business under new management after margin pressures resulted in a quarterly loss.

‘Investors will be hoping the review doesn’t turn up any nasties when the UK’s biggest dealer publishes the results in June,’ said Russ Mould, investment director at AJ Bell.

‘What today’s news indicates is a continuing reluctance on the part of UK consumers to splash out on big ticket items amid economic and political uncertainty unless prices are cut.’

In European markets, Italian football team Juventus (JUVE.MI), one of three clubs held in star manager Nick Train’s Lindsell Train Global Equity fund, fell 16% to €1.42 after being knocked out of the Champions League by Ajax Amsterdam on Tuesday night.

Unchanged inflation figures in the UK, with the consumer price index at 1.9%, reflected a balance between higher petrol costs as the oil price rallies and lower clothing and footwear prices. Th retail price index, which includes the impact of mortgage costs, fell to 2.4%, down from 2.5% last month.

Restaurant and hotel prices, along with other recreation costs, pushed prices higher but there was a sharp reduction in the contribution from food and alcohol from last year.

Fidelity International Personal Investing investment director Tom Stevenson said the Bank of England was likely to keep interest rates low.

“The Bank is stuck on the horns of a Brexit dilemma,’ he said. ‘The strong jobs market illustrates the danger of leaving interest rates at today’s historically low level but the rest of the economy is clearly struggling with the ongoing uncertainty which only deepened with the latest Article 50 extension.

‘Until there is more political clarity, the Bank will remain unable to begin its desired normalisation of monetary policy.’ 

Overnight economic data from China beat expectations, with growth at 6.4% in the first quarter, ahead of the 6.3% forecasted. Industrial production rose by 8.5%, above the expected 5.9%, assuaging concerns after industrial profits in the first couple of months of the year declined 14%.

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Nick Train
Nick Train Average Total Return:
3/165 in Equity - UK (All Companies) (Performance over 3 years)

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