BP Share News (BP.)

LONDON (Alliance News) - London share prices were sharply lower Monday midday, while Wall Street is expected to follow European markets into the red, after a heavy sell off in Asian equities and concerns about the state of China's economy continued to play havoc with investor sentiment around the world.

The FTSE 100 traded down 2.8% at 6,014.42 midday, the FTSE 250 was down 3.1% at 16,353.68, and the AIM All-Share was down 3.1% at 709.81. Other major European indices also were down, with the CAC 40 in Paris falling 2.9% and the DAX 30 dropping 2.8%.

Meanwhile, US stocks also were called for a much lower open, having closed lower on Friday as well. The Dow Jones Industrial Average was seen down 2.6%, the S&P 500 down 2.4% and the Nasdaq 100 down 3.8%.

In a very light economic calendar in the US Monday, there is the Chicago Fed National Activity Index at 1330 BST, before Federal Reserve Bank of Atlanta President Dennis Lockhart speaks at 2055 BST.

As a result of China's weak economic data, yuan devaluation and stock market rout, analysts and investors are starting to change their minds and no longer believe that the Federal Reserve will raise US interest rates at its next meeting of September, as previously expected.

Alongside the concerns about China, the minutes of the Fed’s July meeting showed Federal Open Market Committee members looking for more convincing evidence on US economic data before raising rates.

"While America is creating jobs, growth has been tepid and recent performance data have been patchy," said Stephen Boyle, chief economist at Royal Bank of Scotland. "Fed members also fretted about the effect of China’s slowdown on the US. As a result, markets pushed back the expected date of the first rise to December."

In the US economic economic calendar this week, Markit services and composite purchasing manager's indices are expected on Tuesday, whilst initial and continuing jobless claims and gross domestic product data are due on Thursday. Investors also also be looking ahead to the Jackson Hole Symposium, starting on Thursday, for insight into the sentiment of Fed officials, though Fed Chair Janet Yellen will not attend.

In another attempt to slow the meltdown in its stock market, China's State Council published the finalized rules to allow pension funds managed by local governments to invest in domestic stock markets.

"Regardless of what the Chinese government and People's Bank of China might be saying and doing, they are currently learning a lesson that many have learned before them, namely you can only fight against market forces for so long before you end up losing," said Alistair McCaig, market analyst at IG.

The Hang Seng in Hong Kong ended down 5.2%, and the Shanghai Composite lost 8.5%. Both indices finished at lows they haven't seen since March. In Japan, the Nikkei in Tokyo ended down 4.6%.

"The volatility index has now doubled in less than three trading days, and this is a clear example that panic rather than prudence is driving traders’ thinking," highlighted IG's McCaig.

On the London Stock Exchange, RSA Insurance Group was the only winner in the FTSE 100 at midday, up 1.1%. Zurich Insurance has asked the insurance company for more time to make an offer for the company, the FT reported on Sunday. According to the report, the two insurers made progress on the potential GBP5 billion plus deal over the weekend.

Mining stocks were leading the decliners, with the FTSE 350 Mining sector down 5.0%. Amongst its constituents, Glencore was down 6.3%, Anglo American, down 6.1%, and BHP Billiton, down 6.0%.

Separately, Anglo American said it has reached a deal to sell its interest in two copper mines to a consortium for up to USD500 million.

Oil-related stocks were also dragging down the blue-chip index as crude prices have fallen to new six-and-a-half-year lows. Brent oil hit a low of USD43.23 a barrel on Monday, standing at USD43.75 Monday midday, while West Texas Intermediate was trading at its low for the day at USD38.96 a barrel.

BG Group shares were down 3.9%, Royal Dutch Shell 'A' shares down 3.7% and BP down 3.2%. In the FTSE 250, Amec Foster Wheeler was down 4.2% and Petrofac was falling 3.8%.

Analysts say oil markets are oversupplied and demand from China is dwindling. Also, following the nuclear agreement reached last month, expectations that Iran will return to its position as one of the world’s biggest oil suppliers have been boosted, after UK Foreign Minister Philip Hammond on Sunday reopened the country's embassy in Tehran, four years after it was stormed by protesters angry at Britain's backing of sanctions against Iran over its nuclear programme.

Outside commodity stocks, Bunzl traded down 3.6%, even though the distribution and outsourcing company said its pretax profit rose in the first half on the back of better revenue and said it has made four more acquisitions. It said its pretax profit for the six months to the end of June was up to GBP147.1 million from GBP132.3 million a year earlier, an 11% rise, on the back of a 7% rise in revenue to GBP3.14 billion from GBP2.94 billion.

In the FTSE 250, Amlin was down 2.3%. The specialty insurer and reinsurer reported that profit in the first half was hit by a change to its accounting for the seasonality of catastrophe reinsurance earned premium, with the effects to unwind in the remainder of 2015. Chief Executive Charles Philipps also told journalists that Amlin is not for sale.

In the AIM-All Share index, African Potash was up 57%. The potash producer said it has signed a memorandum of understanding with a Zambian fertiliser supply company which will lead to the company supplying over 50,000 metric tonnes of fertiliser a year. This is the first MOU to be signed since African Potash struck a deal with the Common Market for Eastern and Southern Africa (COMESA) and the Mask Africa Crowd Farm Fund Ltd with a view to creating a production and distribution platform for fertiliser in Eastern and Southern Africa earlier in August.

Belfast-based television company UTV Media was up 8.3% after it confirmed it is holding talks on the potential sale of its television assets. In a short statement, UTV said the talks are "ongoing" and there is no certainty they will lead to a transaction being agreed. The Guardian newspaper reported over the weekend that ITV, the FTSE 100 broadcaster, is in talks to buy the company.

Meanwhile, Blinkx was down 25%. The internet media company said it expects to post an operating loss for the half year after weaker-than-expected trading in the second quarter. The company said its performance in the first quarter was in line with expectations, but early indications from the second quarter were below its forecasts, and it now expects to post an operating loss in the first half to the end of September.

By Daniel Ruiz; danielruiz@alliancenews.com

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