London shares take a New Year pounding in early trade on Monday as traders reacted to heavy falls on the Shanghai Composite stock ladder and the bleak outlook for China's economy. Bourses in Germany and France were heavily lower, too. The benchmark FTSE 100 index dives 109 points, or around 1.8%, to 6,133, although declines are less pronounced among UK midcap and smaller companies.
Stocks in Shanghai sink 6.4% and Shenzhen falls 8.2% as worse-than-expected manufacturing data shows economic performance at a six-year low. The Caixin purchasing managers index (PMI), China’s first official report of 2016, was 48.2 in December, down from 48.6 in November. A number lower than 50 indicates contraction in activity.
Big-ticket miners bear the brunt of the hammering, with Anglo American (AAL) leading the Footsie loser board with a 7% slump to 278p. It is closely followed south by Glencore (GLEN), down 5.9% to 85.12p, and Antofagasta (ANTO), down 4.6% to 447.7p. Asia-focused bank Standard Chartered (STAN) also takes a beating, off 4.5% to 538.6p, as does Old Mutual (OML), falling 4% to 171.7p, while FTSE 350 investment trust Fidelity China Special Situations (FCSS) falls 3.9% to 138p.
Drinks giant Diageo (DGE) softens 21.5p to £18.35, despite completion of the sale of its major wine interests – the US-based Chateau and Estate Wines and UK-based Percy Fox businesses – to Treasury Wine Estates. Part of CEO Ivan Menezes' drive to sell off non-core assets and sharpen Diageo's focus, the sale had already been announced in October and so fails to generate any share price fizz.
Despite it being an otherwise quietish day for corporate news several small caps make large gains, led by bombed-out Israeli tailor Bagir (BAGR:AIM). It rebounds 26.7% (1p) to 4.75p as a positive banking update triggers a relief rally. New arrangements with lenders Leumi Bank and Discount Bank, including the waiver and amendment of covenants and the reclassification of a short-term loan to a long-term loan, give Bagir the breathing space to continue with its turnaround.
In the resources space, StratMin Global Resources (STGR:AIM), up 8.7% to 3.13p, says ASX-listed Bass Metals completed the transfer of the remaining portion of the first tranche funding of £500,000 under the deal announced on 2 September.
UK Oil & Gas Investments (UKOG:AIM) rallies 7% to 1.48p as it receives notification by Horse Hill Developments that the Oil and Gas Authority has granted consent for an extended flow test over three separate zones in the Horse Hill-1 oil discovery well. Doriemus (DOR:AIM) and Stellar (STEL:AIM) issued similar statements yet their share prices remain unmoved.
Oil explorer Cairn Energy (CNE) is up 5.5% to 166.35p as it confirms the successful testing of the SNE-2 appraisal well, offshore Senegal, with positive results. Resource estimates for the SNE field will be fully revised and announced after further appraisal activity.
AIM-quoted Nighthawk Energy (HAWK:AIM) gains 10% to 1.32p as it secures a further extension on the renegotiation of its reserve based lending facility. The US hydrocarbons producer, like many of its peers, is seeing its borrowing base come under pressure as banks reset their oil prices assumptions.
Automated analytics play Arria NLG (NLG:AIM) rises 3% to 31p as it signs a Framework Agreement with a major electric utility in the Eastern region of the US.
Unloved African agri-business Zambeef Products (ZAM:AIM) fattens up 3% to 8.62p on share buying by non-executive directors Adam Fleming and John Rabb. For more on the Zambeef turnaround story, read our recent small cap article here.
Packaging group Smurfit Kappa (SKG) falls 2.6% to €22.97 after acquiring two paper-based packaging businesses in Brazil for €186 million. It says the deal is immediately earnings accretive and will generate synergies of approximately €6 million by the end of 2017.