Rio Tinto Share News (RIO)

Thu, 12th Jul 2012 17:47

* FTSE 100 index down 1 pct, tests technical support

* Miners weak as commodity prices fall

* Chinese data eyed; Fed disappoints



By Viktoria Dendrinou

LONDON July 12 (Reuters) - Britain's top share index dropped

in weak volume on Thursday to post its b iggest daily fall in

nearly three weeks as growth concerns and fading hopes for

near-term U.S. monetary stimulus hit investor sentiment.

Minutes from the U.S. Federal Reserve's June meeting,

released overnight, suggested the central bank would be prepared

to give stimulus through a third round of quantitative easing

(QE) but the economic outlook would need to worsen first.

That hit key commodities like copper which in turn

weighed on the heavyweight mining sector, among the

biggest drags on the index, and fanned concerns about the sector

outlook as the second-quarter earnings season kicks off.

Nervousness ahead of key second quarter growth data from

major metals consumer China, due on Friday, also kept investors

on edge.

'Markets overreact both ways, and this time is on the

downside. As Europe is stagnating, China is slowing and America

is losing momentum, expectations going into the earnings season

are very low,' said Mike Lenhoff, chief strategist at Brewin

Dolphin.

The FTSE 1000 closed down 56.23 points, or 1

percent, at 5,608.25, extending gains later in the session as

U.S. stocks fell, on track for their sixth consecutive

daily fall.

Technical charts also pointed to further weakness for the

FTSE 100.

'The recent development now points to at least an attempt to

end the June correction (higher). If playing out as thought, the

market will soon be challenging the 5,435 support and, if

broken, new lows will be confirmed,' said a technical strategist

at SEB.

Trading volumes were again thin, at 67.5 percent of the

90-day daily average. With July nearly half-way through,

activity on the benchmark index is at under 30 percent of the

levels posted for June, according to Thomson Reuters data.

'Volumes have been dreadful, and the Olympics are not going

to help,' said Ian Williams, a strategist at Peel Hunt. 'You

can't see much reason for investors to change their positions at

the moment'.



ASHMORE LEADS FALLERS

Funds house Ashmore Group was the biggest FTSE

casualty, down 6.7 p ercent in volume more than four times its

90-day average after it reported the flight of about a fifth of

the money it manages in equities during its fourth quarter, hit

by euro zone worries and a flagging global economy.

Among miners, the biggest faller was Rio Tinto, down

3.5 percent and taking just over five points off the index.

Rival BHP Billiton fell 3.3 percent, and miners claimed

five of the top 10 spots on the FTSE fallers list.

Adding its weight to the gloomy sector outlook, Credit

Suisse lowered its earnings per share (EPS) estimates for the

sector.

'With China growth and commodity demand structurally slowing

the earnings outlook is muted, with on-going cost pressures and

minimal top line growth; we forecast earnings down 20-30 percent

year-on-year in 2012 and small growth in 2013,' it said.

Earnings are likely to remain a strong focus for investors

as the second quarter reporting season slowly kicks off.

Shares in Intercontinental Hotel Group dropped 2.3

percent after U.S.-listed rival Marriott reported a higher

quarterly profit but said it was seeing weakness in some

international markets.

($1 = 0.6426 British pounds)



(Editing by Simon Jessop and Catherine Evans)

((viktoria.dendrinou@thomsonreuters.com)(Reuters Messaging:

viktoria.dendrinou@thomsonreuters.com))



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