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Miners' fears over Chinese growth drag FTSE down

BHP Billiton (BLT.L) and Rio Tinto (RIO.L) executives expect weaker iron ore demand from China as economic growth slows.

 
Miners' fears over Chinese growth drag FTSE down

Mining companies weighed on the FTSE 100 as executives from BHP Billiton (BLT.L) and Rio Tinto (RIO.L) said Chinese demand for steel and iron will slow if the nation’s economy cools as expected.

The cautious outlook on metal demand saw miners become the worst performing stocks on the FTSE 100. 

Carsten Fritsch, commodities analyst at Commerzbank, said: ‘They [BHP and Rio] believe that both steel production and demand for iron ore will lose momentum. In future, they expect the latter to see "only" single-digit growth.

‘These statements should be seen in the context of the lower growth target set by the Chinese government, and in our view should not come as any great surprise to the market. Both companies anticipate a “soft landing” in China, with solid growth continuing.’

In Tuesday trade Fresnillo (FRES.L) lost 89p, or 5%, to £16.87; Rio Tinto shed 150p, or 4.2%, to £34.64; Anglo American (AAL.L) dropped 107.5p, or 4.1%, to £25.05; and BHP Billiton fell 83p, or 4%, to £19.65.

Oil prices fall on Saudi Intervention

Oil prices fell more than $2 a barrel following intervention from Saudi Arabia to ease prices. The move came amid fears that soaring costs may hamper an economic recovery.

Brent crude for delivery next month fell 1.1% to $124.33 per barrel and West Texas Intermediate crude for next month delivery lost 1.63% to hit $106.33.

UK inflation, measured by the consumer price index (CPI), fell back 0.2% to 3.4% in February to reach its lowest levels in 15 months. The drop missed economists’ forecasts and may result in the Bank of England taking further measures to boost the economy.

The benchmark UK index of blue-chip shares lost 1.17%, or 70 points, to 5,891 and the Mid-250 index shed 0.19%, or 153 points, to 11,633. See the FTSE's performance.

Other stock markets in Europe also suffered: Germany’s DAX index fell 1.39% to 7,055, France's CAC 40 index dropped 1.32% to 3,531, and the FTSEurofirst 300 index of top European shares fell 1.12% to 1,093.

In the US weaker-than-expected housing starts were reported, with 0.7 million new builds beginning in February, lower than the 0.71 million reported in January.

The Dow Jones Industrial Average slid 0.51% to 13,172, the Standard & Poor's 500 index lost 0.47% to 1,403, and the Nasdaq Composite index fell 0.61% to 3,060.

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