Shares in British mining companies dealing in commodities such as gold, diamonds, platinum, copper, zinc and lead that are listed on the FTSE plunged on 19 October (Monday) after China reported its slowest economic growth since the 2008 global financial crisis. Some mining shares dropped to two-week lows. While Anglo American fell 4.9%, Glencore tumbled 3.2%, Rio Tinto was 1.2% lower, BHP Billiton slid 1.2% and Antofagasta was down 0.9%. Gold miners Randgold Resources and Fresnillo also fell 2.1% and 2.4% respectively.
Laith Khalaf, senior analyst at Hargreaves Lansdown, opined that the relatively poor performance of manufacturing could be the reason for the fall in mining stocks. Adding to the low China numbers, UBS said diamond prices were weak because of which Anglo American might face a further downside risk to earnings and that its third quarter revenues could decline as much as 50% due to lower demand for gems.
"It is a concern that cut diamond prices are still falling and there has been a material inventory build," a UBS analyst said. Analysts at Rapaport forecast third quarter sales at De Beers to fall about 67%.
Though overall, the FTSE 100 has rallied about 5% since the beginning of October, it is still down 10% from the record highs that the index reached in April. Chris Beauchamp, of IG, said: "It looks increasingly like the bounce of early October was a false dawn, and barring some kind of sustained revival in risk appetite, perhaps via fresh monetary stimulus, the sector is heading lower once again."
According to China's National Bureau of Statistics, the GDP of the world's second largest economy was 6.9% for the July-September period. Though this was better than analysts' estimate of 6.8%, it was lower than the government's full-year growth target of 7%. The GDP data confirmed weakness in industrial output casting a shadow over commodity firms.