FTSE drops as Chinese exposure turns sour for miners and Burberry

Stock markets around the world gave back some of the gains they had made so far in August after a poor release of data out of China.

London’s natural resource companies, many of which sell heavily to the Chinese market, pulled the FTSE 100 index down.

They were joined by Burberry, the luxury fashion retailer which also does a lot of business in the country.

By the end of Monday, the index had given back 64.73 points, ending at 7153.98.

The 0.9% retreat was accompanied by similar, if not equally bad, drops on European markets.

The Dax in Germany fell 0.3% while France’s Cac dropped 0.8%.

“Having seen European markets eke out incremental gains on an almost daily basis since the beginning of the month, it shouldn’t have been too much of a surprise to see a little bit of a pullback at some point,” said CMC Markets analyst Michael Hewson.

“We certainly don’t have to look too far for the catalyst for today’s weakness, having got a weak hand off from markets in Asia, which came under pressure in the wake of some really disappointing data out of China.

“We got some indication of a slowdown in the recent China trade numbers last week, however the extent of the slowdown in the latest industrial production and retail sales in July has prompted some significant weakness in the likes of companies tied to the economic cycle in Asia, and China especially, with the FTSE 100 getting hit particularly hard.”

In the US, the S&P 500 was trading down 0.4% while the Dow Jones dropped 0.2% shortly after European markets had closed for the day.

In currency markets, sterling gained slightly against the euro, but dropped 0.1% against the dollar.

By the end of the day one pound could buy 1.3848 dollars or 1.1761 euros.

In company news, the UK’s Ultra Electronics agreed a nearly £2.6 billion deal with private-equity backed Cobham Group.

Meanwhile, Meggitt, another defence group, reaffirmed that it plans to accept a £6.3 billion bid from a US business.

Shares in Ultra electronics ended the day up nearly 6% after the news. But Meggitt’s announcement was no surprise to shareholders. Its shares dipped by 0.2%.

Mining giant BHP has said it is reviewing the future of its petroleum business and is in talks over a merger for the arm with an Australian oil firm.

Miner BHP also released merger news, revealing it is looking at options for what to do with its petroleum business.

The company is in talks with an Australian oil business which could be interested in buying the unit.

Shares in BHP, which were hit by a wider sell-off in the natural resources sector, fell by 1.8%.

Magazine publisher Future announced a deal of its own, buying fellow publisher Dennis for £300 million. Share in Future soared by 7.5% following the deal’s announcement.

The biggest risers on the FTSE 100 were Fresnillo, up 14.6p to 812.2p, CocaCola HBC, up 43p to 2,709p, Ocado, up 24p to 1,804p, Phoenix Group, up 8.2p to 671.8p, and London Stock Exchange, up 62p to 7,992p.

The biggest fallers on the FTSE 100 were Prudential, down 58.5p to 1,460p, United Utilities, down 72p to 2,058p, Weir Group, down 50.5p to 1,643p, Entain, down 55.5p to 1,904.5p, and Evraz, down 16.2p to 572.2p.