Glencore leads London's miners lower after falling commodity prices cuts profits in half

By Jamie Chisholm

Glencore shares slid more than 4% after the Swiss mining and trading group revealed profits cut in half by falling coal prices amid soft demand from China.

The FTSE 100 constituent led other London-listed miners lower as news on Tuesday of weak China trade data added to fears that raw material sales to the world's second biggest economy may fall further.

"The Chinese economy continues to splutter and that's bad news for a FTSE 100 chock full of companies which are closely tied to its fortunes...This time it's trade data which has come in way short of expectations," said AJ Bell investment director Russ Mould.

Earnings before interest, taxes, depreciation and amortisation at Glencore fell 50% to $9.4 billion in the first six months of the year as global thermal coal prices traded at less than half the level of a year ago having spiked in the wake of Russia's full invasion of Ukraine.

Lower prices for metals and oil, alongside dwindling commodity market volatility hit Glencore's trading arm, while higher costs also hit margins at mining operations.

Glencore said it would raise the dividend by $1 billion and buy back another $1.2 billion of its shares, but analysts noted the largesse was lower than last year. "Glencore has dialed back its generosity in terms of shareholder returns -- though some of this is about keeping powder dry for a potential deal to acquire assets from Canada's Teck Resources after a long-running pursuit," said Mould.

Still, Liam Fitzpatrick, research analyst at Deutsche, said Glencore was a buy with a price target of 560p as the second half "should be a more predictable period with materially stronger operating performance expected across the assets (volumes and costs) and working capital and cash tax back to normal levels."

The FTSE 100 UK:UKX in London lost 0.5% as shares in resources groups such as Anglo American , Antofagasta , BHP and Rio Tinto fell back.

But it was Italy's bourse that took the wooden spoon on Tuesday. The FTSE MIB Index IT:I945 fell more than 2% as shares in the country's banks slumped on news Rome would impose a windfall tax on the sector.

"Italy announced an unexpected new levy on the banking sector last night, with premier Giorgia Meloni's government announcing that 'extra profits' made by banks on the back of higher interest rates would be subjected to a 40% additional tax charge. The move comes in the wake of Italian banks increasing their profit guidance for the full year after surging first half profits," noted Steve Clayton, head of equity funds at Hargreaves Lansdown.

UniCredit fell more than 6% and many other banks, including Intesa Sanpaolo , FinecoBank and Banco BPM lost 8%.

Meanwhile, the British pound fell 0.5% to $1.2724 and 2-year gilt yields BX:TMBMKGB-02Y slipped 8 basis points to 4.854% after data showed U.K. consumer spending slowed more than expected in July.

-Jamie Chisholm

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08-08-23 0759ET