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“The FTSE 100 refuses to budge on Wednesday as mining sector weakness is offset by another good day for the insurance sector, plus gains in drug and healthcare companies,” says Russ Mould, investment director at AJ Bell.
Balfour Beatty
“You can sum up the market reaction to Balfour Beatty’s results as ‘what have you got up your sleeve for your next trick?’
“The modest share price response to the construction company’s numbers seemed out of sync with a 69% jump in underlying profit and the dividend being increased by a third.
“The only fly in the ointment being an increase in the cash outflow associated with the troubled Aberdeen Western Peripheral Route where doomed Carillion was a partner.
“Chief executive Leo Quinn has a well-earned reputation as a turnaround specialist, a role he performed with aplomb at defence firm QinetiQ and printing outfit De La Rue in the past.
“He has done a good job of fixing Balfour’s balance sheet, bringing costs under control and boosting profitability.
“However, now that all of its divisions are either achieving industry-standard margins or are set to do so in the second half, attention will turn to where Quinn can take Balfour next. He may face a difficult task in an uncertain UK construction market despite a robust looking order book.”
Copper price / Mining sector
“Trade wars and emerging markets health concerns may be grabbing the headlines, but another big story is brewing in the background.
“The price of copper has this week hit a 13-month low following a sharp slowdown in China’s fixed-asset investment growth. This news, together with waning investor appetite for riskier assets, has unsurprisingly put a dent in the mining sector. Kaz Minerals, Antofagasta, Anglo American, BHP Billiton, Glencore and Rio Tinto have all seen their shares fall in value off the back of the events.
“Copper is widely considered to be a bellwether for the global economy and so a weak price is cause for concern.
“The metal has fallen by nearly 18% since June to $6,044 per tonne. That represents the biggest decline since 2015.
“Copper was in a falling trend between 2011 and 2016 but has bounced back over the past few years. The latest events put an end to this recovery. However, it is worth noting that we are in no way approaching panic territory. Copper slumped to $2,870 per tonne in December 2008 amid the global financial crisis, more than half today’s price.
“The copper price enjoyed a surge earlier this year when markets were worried about potential supply disruptions as workers threatened to strike at some of the big copper operations in Chile. While that strike threat has now eased, it is important to note that labour issues are a recurring problem for the copper mining industry and could come back to haunt the sector at any time.
“So why is copper so important? It is one of the best metals for electrical conductivity and so is widely used in cables for power grids, motorised equipment, dynamos and many more applications that connect with our everyday lives. Trains, planes and automobiles are full of copper, so too are homes and appliances.”
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