The FTSE 250 was down 1.9% to 20,476.4 and the AIM was down 1.6% to 1,031.9 in early trade on Monday, after lockdown fears in Chinese capital Beijing spiked investor concerns of an economic slowdown as production looked set to grind to a halt in the “factory of the world.”
The combination of a potential lockdown in China and rising rates of inflation at 7% in the UK and 8.5% in the US has set investors’ teeth on edge as the market caught the brunt of Monday’s surging wave of pessimism.
“The prospect of further restrictions in China could lead to a poisonous mix of further inflationary pressure, as supply chains in the so-called ‘factory of the world’ get disrupted, and weaker economic growth,” said AJ Bell investment director Russ Mould.
“The result could be stagflation – a slowing economy accompanied by surging prices – a brew few investors would be able to stomach.”
BlackRock World Mining Trust shares plummeted 9% to 656p as mining shares sank and its holding in Anglo American took a hit on the back of the company’s Los Broncos copper project hurdle, which is in the line of fire after regulators in Chile recommended blocking the operation. Anglo accounts for 7.9% of the trust’s holdings.
“The energy transition may be heavily reliant on copper but that doesn’t mean it will be easy for miners to get the metal out of the ground,” Mould commented on Anglo’s delays.
“While the world might benefit from wider availability of the metal, which is critical for renewables and electric vehicle components and infrastructure, complaints domestically about the environmental impact within Chile demonstrate the difficult balancing act miners face as they look to show off their new ‘green’ credentials.”
Future shares fell 5.6% to 22,430p after Barclays cut the company’s rating to ‘overweight’ with a price target of 3,300p against 3,900p.
Ferrexpo shares took a dip of 5.1% to 165.4p following JP Morgan’s ‘neutral’ rating with a price target cut to 340p from 350p.
Liontrust Asset Management shares fell 4.4% to 11,660p as the fund manager suffered the fallout of sharp downside in global markets.
7digital Group shares rose 8.3% to 0.3p following the company’s £1 million contract win with a pan-Arian multinational consumer services corporation to deliver an app-based music streaming service to enhance the company’s customer engagement.
“This is a major, multi-year contract for 7digital that further enhances our visibility over our forecast revenues for the next two years,” said 7digital CEO Paul Langworthy.
“It is an important endorsement of our offering having been awarded by a multinational corporation and after a competitive tender.”
Premier African Minerals shares were up 8.2% to 0.3p after the mining group announced its joint-venture agreement with Li3 Resources, which is set to see Li3 Resources acquire a 50% interest in Premier’s hard-rock lithium assets based in the Mutare Greenstone Belt in Zimbabwe.
“The Li3 Project is located in a region in Zimbabwe that is receiving significant interest in both Lithium and potential gold deposits,” said Premier African Minerals CEO George Roach.
“The claim blocks are well located and, in several instances, have already attracted interest from international lithium producers.”
Hummingbird Resources shares dropped 19.4% to 14.1p after its Q1 output declines due to planned maintenance work.
The group’s output fell 32% year-on-year to 15,548 ounces of gold, down from 22,781 ounces from its Mali, Liberia and Guinea projects.