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LONDON MARKET MIDDAY: Miners hit by slowing China industrial growth

Stocks drifted on Monday with investors mulling some disappointing Chinese industrial output and retail sales data amid an otherwise quiet economic calendar.

The coming days promise excitement though, with UK unemployment data on Tuesday before an inflation reading on Wednesday. The latest US Federal Reserve meeting minutes are also released on Wednesday.

The FTSE 100 was down 7.56 points, or 0.1%, at 7,493.33. The FTSE 250 index was up 22.42 points, or 0.1%, at 20,361.38. The AIM All-Share index was down 0.82 of a point, or 0.1%, at 932.38.

The Cboe UK 100 index was down 0.1% at 748.81. The Cboe 250 was down 0.1% at 17,664.67. The Cboe Small Companies was flat at 14,476.24.

In Paris, the CAC 40 was 0.2% higher, while the DAX 40 in Frankfurt edged fractionally lower.

The pound was quoted at $1.2079 midday Monday in London, down from $1.2121 late Friday. The euro stood at $1.0202, down from $1.0248. Against the yen, the dollar was trading at JP¥133.35, down from JP¥133.63.

Investors on Monday were digesting a rate cut from the People's Bank of China, which surprised market participants.

The PBoC sliced the medium-term lending rate to 2.75%, a reduction of 10 basis points. The interest rate is used a benchmark for one-year loans provided to the banking system.

The move came after factory output and retail sales in China edged up in July but were weaker than analysts' expectations, as a Covid-19 resurgence and property market jitters cast a pall over hopes for a stronger economic recovery.

The world's second-biggest economy saw a bounce in business activity as some coronavirus restrictions eased in June, but the boost is fading and Beijing remains welded to a zero-Covid policy of snap lockdowns and long quarantines, which has battered sentiment.

But for July, China's industrial production rose 3.8% on-year, down from a 3.9% jump in June, the National Bureau of Statistics said Monday. This undershot market expectations, according to FXStreet, for growth to speed up to 4.6%.

Retail sales grew at a slower-than-expected 2.7% from a year ago, down from 3.1% in June, while the urban unemployment rate fell to 5.4%, the NBS said. Retail sales had been expected to rise 5%, according to FXStreet.

‘This has obvious implications for global growth and, in particular, commodities demand, and in this context it was no surprise to see shares in the big mining firms slip a little in early trading,’ said AJ Bell financial analyst Danni Hewson.

Anglo American fell 2.4% in London, Antofagasta lost 2.3% and Rio Tinto was 2.1% lower.

Rio Tinto, meanwhile, reiterated its proposal to acquire full-ownership of Turquoise Hill Resources.

The announcement comes after Turquoise Hill said earlier in the day that it was no longer considering Rio Tinto's takeover offer.

The Canadian mining firm said Rio Tinto's offer did not ‘fully and fairly reflect the fundamental and long-term strategic value’ of its majority ownership in the Oyu Tolgoi copper-gold project in Mongolia.

Elsewhere in London, Treatt shares slumped 31% after the natural extracts and ingredients supplier cautioned on annual profit.

The company expects pretax profit before exceptional items in the financial year ending September 30 to land between £15.0 million and £15.3 million, down from £20.9 million in the year prior.

Treatt said its margins have been hit by the devaluation of the pound against the dollar, with its UK business making a portion of its sales in US dollars and using foreign currency exchange contracts to manage risk. In addition, tea category sales will be lower than the year before, due to reduced demand and consumer confidence in the US, which has reduced margins.

CT Automotive fell 21%. The Portsmouth, England-based maker of custom interiors for cars said its UK manufacturing facility has become loss making, hitting its first half gross margin by $1.7 million.

‘The board has therefore taken the decision to cease the UK manufacturing operations, which accounted for 5% of group revenues,’ CT Automotive added.

However, revenue in the first half of 2022 amounts to $55 million, ahead of board expectations.

Velocys jumped 13% as it hailed the passing of the Inflation Reduction Act of 2022 in the US, which includes legislation to allocate around $369 billion dedicated to reducing green house gas emissions and incentives to expand use of clean energy.

The bill is expected to be a tailwind for the company and will support financing for its US sustainable aviation fuel reference project.

A divided Congress gave final approval on Friday to a flagship climate and health care bill, handing US President Joe Biden a back-from-the-dead triumph on coveted priorities that the party hopes will bolster their prospects for keeping their House and Senate majorities in November's elections.

The House used a party-line 220-207 vote to pass the legislation, prompting hugs among Democrats on the House floor and cheers by White House staff watching on television.

The measure is but a shadow of the larger, more ambitious plan to supercharge environment and social programmes that Biden and his party unveiled early last year.

Stocks in New York are called lower on Monday. The Dow Jones Industrial Average and S&P 500 are called 0.5% lower, and the Nasdaq Composite 0.4% lower.

Brent oil was quoted at $93.56 a barrel on Monday early afternoon, down from $97.91 at the London equities close on Friday. Oil prices were hit by the weaker Chinese data.

Gold was quoted at $1,778.25 an ounce, down from $1,797.13.

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