LONDON (Alliance News) - UK shares reversed a firm open and trade lower mid-morning Monday, led by London's heavily-weighted mining sector following more concerns about the Chinese economy.
London's blue-chip FTSE 100 index trades down 0.7% at 6,670.48, the mid-cap FTSE 250 is down 0.1% at 17,634.50, and the AIM All-Share is down 0.2% at 751.95.
In Europe, the French CAC 40 and the German DAX 30 are both up 0.2%.
Chinese exports declined at a faster-than-expected pace in July, figures from the General Administration of Customs showed on Saturday. Exports decreased 8.3% year-on-year in July, reversing the 2.8% increase in the previous month. Economists had expected exports to decline 1.5%. At the same time, imports were down 8.1% in July and had been forecast to fall 8%. The trade surplus totalled USD43.03 billion, below the expected surplus of USD54.7 billion.
China's consumer prices increased at a faster rate for the second straight month in July, with inflation exceeding the consensus estimate, figures from the National Bureau of Statistics showed on Sunday. Consumer prices increased 1.6% year-on-year in July following the 1.4% rise in June. In May, prices had risen 1.2%. Economists had expected a 1.5% growth for the month.
However, producer prices fell at a steeper-than-expected pace and declined by the most in six years. In a separate report released by the agency, producer prices were reported to have contracted by 5.4% annually in July, following a 4.8% drop in the previous month.
"The weaker-than-expected export growth and PPI deflation in July point to downside risks to economic growth. We expect more expansionary fiscal policy to be rolled out to boost infrastructure investment, and monetary policy to remain accommodative for the rest of this year," says Nomura.
"We maintain our call of one more 50bp reserve requirement ratio (RRR) cut and one more 25bp policy interest rate cut this year. Given signs of weakening growth momentum, we believe the next move is likely to be a RRR cut in August," Nomura adds.
The poor economic data from China is weighing on mining stocks which dominate the fallers list in the FTSE 100. Anglo American is down 2.3%, BHP Billiton down 2.2% and Antofagasta down 2.2%.
Oil-related companies continue to feel the pressure from weak oil prices. Brent oil hit a new six month low overnight of USD48.20 a barrel and currently trades at USD48.48 a barrel. US benchmark West Texas Intermediate hit a five-month low at USD43.35 a barrel.
In the FTSE 100, Royal Dutch Shell 'A' is down 1.4%, and BP is down 1.2%. In the FTSE 250, Petrofac is down 3.7%, Premier Oil is down 3.6% and Ophir Energy trades down 3.4%,
Bjarne Schieldrop, chief commodities analyst at Skandinaviska Enskilda Banken, believes Brent oil is likely to test the lows it made in January, when it made a new six-year low.
"In January oil prices rebounded as a response to the sharp fall in US oil rigs together with expectations for a comparably sharp decline in US oil production. This does not seem to have happened. The market is still running a surplus. OPEC is not holding back, and US oil rigs have been rising for the last three weeks," Schieldrop says.
"The market needs to see actually falling US oil production. In this respect EIA's drilling productivity report due out later today may shed some light," Schieldrop added, referring the US Energy Information Administration.
Elsewhere on the London Stock Exchange, Meggitt shares trade up 0.9%. It said it has agreed to buy the advanced composites unit of FTSE 250-listed aerospace and defence manufacturer Cobham.
Aerospace and engineering group Meggitt will pay USD200 million in cash to acquire the Cobham division, which makes a range of engineering aerospace components and secondary structures and which made USD81.1 million in revenue in 2014. It will be integrated into Meggitt's Polymers & Composites division. The deal will be backed by a USD300 million credit facility, Meggitt said.
Cobham shares trade up 0.5%.
Fund supermarket and stockbroker Hargreaves Lansdown, up 0.3%, said it has hired Chris Hill as its new chief financial officer, poaching him from FTSE 250 spread betting and contracts-for-difference company IG Group Holdings and leaving IG nursing the loss of a second key executive in a matter of weeks.
Hill is expected to take up the role at Hargreaves in March 2016, until which time Simon Cleveland will continue to act as interim chief financial officer. Cleveland took over at the end of June following the departure of Tracey Taylor, who had served as chief financial officer for six years at the end of 15 years working at the company. IG trades down 0.9%.
Esure Group is by far the worst performer in the FTSE 250, trading down 9.6%. The insurer cut is interim dividend, as it said its underlying pretax profit dropped in the first half of 2015 despite a rise in gross written premiums and in-force policies in the period.
It said its underlying pretax profit, which strips out exceptional gains and costs, fell by 21% to GBP46.5 million in the six months to the end of June from GBP59.1 million a year earlier. As a result of the fall in profit, it cut interim dividend to 4.2 pence per share from 5.1p per share a year ago.
Meanwhile, Greece's creditors agreed amongst themselves a draft bailout memorandum that they now hope to finalise with Athens in the coming days, sources said on Saturday, amid growing pressure on the two sides to strike a deal. Athens has been negotiating the new EUR86 billion bailout - its third in five years - with the European Commission, the European Central Bank and the International Monetary Fund for two weeks. The two sides are under pressure to strike a deal and give Greece access to bailout funds by August 20, when it is supposed to make a EUR3.2 billion debt repayment to the ECB.
"The goal of the [creditor] institutions is to agree a memorandum of understanding with the Greeks by Tuesday," a eurozone source said on condition of anonymity.
Still ahead in the economic calendar is the US labour market conditions index at 1500 BST.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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