FOCUS - Leading mining shares down 4-5 pct, 2016 gets off to gloomy start

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Kathleen Retournekathleen.retourne@fastmarkets.comJoint News Editor - Europe+44 (0) 20 7337 2144

London 06/01/2016 - Global mining shares came under pressure in London on Wednesday amid ever-gloomier sentiment and growing concerns about a slowdown in demand, particularly from China.

Disappointing data from the country since the start of the year - most recently, China's December Caixin services PMI at 50.2 missed the forecast of 52.3 and was the slowest rate of expansion in 17 months - has unsettled investors and pressured metals prices lower.

LME copper dropped to a two-week low today while aluminium declined to its weakest for one month. Among the other metals, tin was hit by technical sell-stops, hitting a four-month low.

Additionally, a sell-off in oil hindered confidence in the commodity sector - earlier today, Brent crude tanked to below $35 per barrel amid escalating tensions between Saudi Arabia and Iran as well as oversupply generally.

Consequently, leading mining companies listed on the London Stock Exchange (LSE) were in negative territory on Wednesday - several hit fresh multi-year lows, sending the FTSE 100 index some 81 points lower to 6,055.51.

Rio Tinto slumped 5.1 percent to last trade at 1,839p, the softest since 2008, while BHP Billiton at 702p was down 5.9 percent and at its cheapest since 2005.

Both mining companies have been topics of speculation that they could raise substantial capital to cut debt and make acquisitions.

"We feel it would make sense for Rio Tinto, BHP, Glencore and Anglo American to raise cash to acquire assets at distressed price levels," SP Angel said in a note on Wednesday.

Mergers and acquisitions have been thin on the ground over the past 12 months - the downward economic spiral has made it difficult to pick a bottom on prices to ensure maximum profit.

Once acquisitions pick up, a reversal in bearish sentiment is possible, investors said.

Glencore was not immune to the downturn - its share price was last at 84.41p, still down some 4.0 percent on Tuesday's close.

The company was quick to react to the slump in global prices in September last year, implementing a slew of measures aimed at restoring investor confidence after its share price fell to an all-time low of 66p that month.


(Editing by Mark Shaw)



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