1945 Concerns about slowing economic growth in China hit the FTSE 100 after a senior executive at miner BHP Billiton said the country’s demand for iron ore was “flattening out.”
The warning, which hit London’s heavyweight mining stocks, comes after China recently lowered its economic growth target to 7.5 per cent from 8 per cent.
The FTSE 100 closed down 69.7 points at 5891.4, while France’s Cac 40 fell 1.32 per cent to 3,530.83 points and Germany’s DAX 30 lost 1.39 per cent to end at 7,054.94 points.
1200 European Union regulators may extend the scope of next year’s bank stress tests to check whether business models are too risky or vulnerable.
The European Banking Authority (EBA), made up of financial regulators from the eurozone’s 27-member countries, is completing this year’s stress test which obliged 31 lenders to plug a €115 billion hole to bring up their core capital level to 9 per cent of risk weighted assets by the end of June.
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The aim is to help restore investor confidence in a sector which the ECB has flooded with €1 trillion of three-year loans to meet funding demands as some investors remain on the sidelines.
The EBA is now turning its attention to next year’s test and has already held a “brainstorming” session to explore ideas.
1100 The gap between northern and southern eurozone countries will widen in 2012 and probably in the two following years, so says Ewald Nowotny, European Central Bank policymaker.
“Such a divergence is unfortunately to be expected in 2012,” Mr Nowotny, who is also the head of Austria’s central bank, said in a chatroom discussion on Austrian newspaper Der Standard’s website.
“After that, the effects of the structural measures adopted in the meantime should work and show up in correspondingly higher growth rates in the states.”
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1030 Business leaders urged Africa to spend more on education and to improve boardroom and government standards if it wanted to maintain the strong economic growth rates of recent years.
“If you only have one pound to spend, spend it on education,” said Tidjane Thiam, the chief executive of Prudential, the insurance group.
Mr Thiam, a former Cabinet minister in the Ivory Coast government and the first black chief executive of a FTSE 100 company, was speaking at the The Times CEO Summit Africa.
Fabulous mineral wealth and a burgeoning middle class in Africa had helped deliver strong growth in recent years but they weren’t enough, bankers and business executives said.
0945 Kathryn Hopkins, Economics Correspondent, writes: Inflation in Britain fell to its lowest level in 15 months in February, fuelling hopes that the squeeze on consumers is finally abating.
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Consumer prices inflation (CPI) dropped to 3.4 per cent last month, from 3.6 per cent in January, according to figures from the Office for National Statistics. This is the lowest level since November 2010 and well below the three-year high of 5.2 per cent recorded in September.
The Bank of England has forecast that inflation could fall below its official target of 2 per cent before the end of the year, but economists warned that this may prove to be “too optimistic” in light of high oil prices.
0630 Hong Kong and China shares retreated in weak trade throughout the day, underperforming Asian peers, as investors took money off the table with the continuing corporate earnings season failing to meet expectations.
According to Thomson Reuters StarMine, of the 43 per cent of Chinese companies that have reported 2011 earnings, nearly 70 per cent have missed forecasts, with material names producing the biggest disappointment.
The Shanghai Composite index lost 0.8 per cent. The China Enterprises index of the top mainland listings in Hong Kong shed 1 per cent, while the broader Hang Seng slipped 0.7 per cent.
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Turnover at midday was weak in both markets, nearing a monthly low in Hong Kong, seen partly constrained because of a Japanese market holiday.
“There’re no fresh positive catalysts; we are in a downward spiral today. I’m just trying to cut my losses,” Alex Wong, the director of asset management for Ample Finance, said.
The Hang Seng and the China Enterprises rose by 17.6 and 19 per cent respectively in the first two months of the year, as investors chased a rally in growth-sensitive names that led a 20 per cent slump last year on both indices.
But the Hang Seng is down by 3.3 and the China Enterprises down 7.6 per cent this month, with the rally unravelling as fundamentals come back into view with corporate earnings kicking into gear.
0330 Asian markets slipped in early trade as dealers looked for a foothold to spur buying despite a positive lead from Wall Street.
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Hong Kong slipped 0.53 per cent, Sydney was 0.36 per cent lower, Seoul gave up 0.21 per cent and Shanghai was 0.75 per cent. Tokyo was closed for a public holiday.
With few catalysts, investors took a breather from a rally since the start of 2012 that has seen most markets rise between 10 and 20 per cent thanks to upbeat data from the United States and easing fears over the European debt crisis.
However, Apple-linked Asian shares were mixed despite the news.
In Seoul LG Display rose 2.4 per cent and Hynix Semiconductor added 0.2 per cent but LG Innotek dropped 0.9 per cent Samsung SDI slipped 1.0 per cent.
0144 BHP Billiton, the world’s biggest miner, is seeing signs that iron ore demand from top consumer China is flattening, but is is pushing ahead with its ambitious plans to expand production.
“Growth is going to flatten off,” BHP’s iron ore division president, Ian Ashby, said in advance of the Global Iron Ore & Steel Forecast Conference in Perth on Tuesday.
Chinese demand for iron ore has been the driving force behind years of expansion work by the world’s biggest mining companies. More than 100 million rural Chinese are projected to settle in towns and cities in the next decade, requiring unprecedented amounts of steel for housing and infrastructure.
But this month China cut its 2012 growth target to an eight-year low of 7.5 per cent.
BHP has being pursuing a strategy of running at full production and expanding capacity in long-life, low-cost commodity assets.
Mr Ashby said that BHP was sticking with its $10 billion iron ore expansion plan and was mining ore at a rate of 165-170 million tonnes a year. That is above its production guidance of 159 million tonnes in fiscal 2012 ending June 30, maintaining the company’s No 3 global ranking in iron ore behind Vale and Rio Tinto .
0136 Hong Kong stocks opened flat, reflecting lacklustre trade in European and US markets as investors kept to the sidelines after strong gains last week.
The Hang Seng index inched down 7.84 points, or 0.04 percent, to 21,107.45 in the first minutes of trade.
0109 Taiwan stocks rose 0.24 per cent in early trade, joining gains in regional bourses, with contract chip maker TSMC leading heavyweights higher.
The main TAIEX index jumped 18.99 points to 8,062.91 at the opening bell, recovering from a 0.14 per cent dip in the previous session.
TSMC, the world’s top contract chipmaker, climbed 0.12 per cent, while electronics shares were up 0.27 per cent.
0050 US crude oil futures dipped this morning after gaining in the previous session, as global supply worries eased after Saudi Arabia increased oil shipments in January and Libya announced plans to lift oil exports to pre-war levels.
On the New York Mercantile Exchange, crude for April delivery, which expires on Tuesday, lost 29 cents a barrel at $107.80 as of 0029 GMT after settling up $1.03 at $108.09.
In London, ICE Brent crude for May delivery extended losses by 36 cents a barrel at $125.35 after settling down 10 cents at $125.71 a barrel.
China will raise retail gasoline and diesel prices by between 6 and 7 percent from Tuesday, marking the biggest increase in 33 months, a move that will help refiners reduce heavy losses but is unlikely to hit demand in a big way.
US commercial crude stockpiles are forecast to have climbed last week on higher imports and lower refinery activity, in line with seasonal patterns, a preliminary Reuters poll of analysts showed on Monday.
Société Générale raised its price forecasts for Brent crude oil and US West Texas Intermediate crude oil for 2012 and 2013 citing supply side issues like tight crude stocks, low Opec spare capacity and strong non-Opec supply disruption.
0009 Seoul shares drifted higher in early trade, tracking gains in Wall Street and crawling above the closely watched technical resistance level of 2,050 points.
The Korea Composite Stock Price Index (KOSPI) was up 0.23 per cent at 2,051.76 points as of 0005 GMT. ($1 = 1122.200 Korean won)
0001 Australian shares drifted lower on a lacklustre performance by banks and miners in early trade, as the controversial Minerals Resource Rent tax was passed into law.
Julia Gillard, the Australian Prime Minister, defended the tax on the country’s mining boom, saying the benefits would be spread to all Australians.
Legislation that imposes a 30 per cent tax on the extraordinary profits of coal and iron ore miners passed the Senate late on Monday night by 38 votes to 32, with the Government winning the key support of the Greens.
The tax is scheduled to start on July 1 and is expected to generate A$11 billion (£7.3 billion, $11.7 billion) in its first three years, which the Government will apply to infrastructure, pensions and tax cuts for small businesses.
It will kick in when a company makes A$75 million a year in profit, a concession the Greens won to protect smaller miners after it was originally planned to start at A$50 million.
Companies with a large portion of offshore earnings continued to underperform as the Aussie dollar held up about $1.06, with CSL Ltd off 0.4 per cent at A$33.88.
The benchmark S&P/ASX 200 index slipped 2.8 points to 4,288.0 at 2335 GMT. The benchmark rose 0.3 per cent on Monday.
New Zealand’s benchmark NZX 50 index eased 1.6 points to 3,484.3.
Yesterday in Europe: The European Commission is widening its regulatory sweep to include “shadow” banking, heralding new controls over the sprawling €46 trillion (£38 trillion) sector blamed for helping trigger the financial crisis.
The EU’s executive launched a consultation with industry today with a view to writing rules to control shadow banking, a term describing activity resembling banks’ basic borrow-and-lend model, but often taking place beyond the watch of regulators.
It opens up a new front in the regulatory drive of Brussels, which some analysts believe has been slow to tackle the causes of a financial crisis that struck Europe roughly five years ago.
“What we do not want is for financial activities and entities to circumvent existing and foreseen rules, allowing new sources of risk to accumulate in the financial sector,” Michel Barnier, the EU official in charge of regulatory reform, said.
“That is why we need to better understand what shadow banking actually is and does, and what regulation and supervision may be appropriate.”
Political leaders are aware of the potential problem that shadow banking presents and the Group of 20 top global economies have asked their task force, the Financial Stability Board (FSB), to come up with plans to regulate the sector.
0000 Welcome to rolling coverage from our Business and Foreign staff of the market turmoil and the latest on the world debt crisis. We will keep this blog updated as markets open and close around the world.