The FTSE 100’s miners sprang back into action on Wednesday after the Chinese manufacturing grew at the fastest pace for over a decade in February.
The FTSE 100 was 0.9% higher after Chinese manufacturing purchasing managers index (PMI) jumped to 52.6 in February, up from 50.1 in January. A reading above 50 signifies an expansion.
Markets have been awaiting evidence a Chinese economy recovery was taking place after the lifting of COVID restrictions late last year. The latest PMI data confirms the world’s second economy is indeed on the front foot.
Rio Tinto gained 4.7% while Antofagasta added 4% and Antofagasta rose 3.9%.
“Miners helped lead the FTSE 100 higher on the latest Chinese manufacturing data which has positive implications in terms of commodities demand,” says AJ Bell investment director Russ Mould.
“Further evidence of the industry’s positive outlook could be found in results from mining services firm Weir which unveiled an impressive increase in its dividend and posted a record order book.”
“The strength in resources stocks helped make for a fragile housebuilding sector as Persimmon’s results created a stink and house prices continued to soften in the UK.”
Housebuilders fall
As Mould alludes to, it was a bad day for the UK housebuilders with Persimmon shares tanking around 10%, dragging the sector down with them.
Taylor Wimpey was down 3.8% and Barratt Developments shed 3.3% of their value.
“Persimmon’s continuing to feel the effects of a shaky housing market. While revenues increased this year thanks to higher house prices and a greater number of completions, the outlook’s not so rosy next year,” said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.
“If current sales rates persist for the rest 2023, full-year completions are expected to fall by more than 40%, which would take a huge bite out of revenues.”
Weir Group
Weir Group was the FTSE 100’s top riser after the mining engineering firm revealed record orders and a 21% jump in revenues in 2022.
“The value creation opportunity for Weir is compelling. The mining industry is playing a crucial role in meeting the twin demands for decarbonisation and economic growth, resulting in multi-decade demand growth for critical metals. Weir is the focused mining technology leader that is well placed to capitalise,” said Jon Stanton, Chief Executive Officer of Weir Group.
Weir Group shares were 8% higher at the time of writing.