China Worries Drag European Markets Led by Resource Stocks

Lucy Stoeva
27 Nov, 2015
New York City

European stocks were under pressure on the deepening economic slowdown in China. Rio Tinto plans to invest $1.9 billion to expand bauxite output. Royal Bank of Scotland booked a loss of

[R]4:00 PM Frankfurt – European stocks were under pressure on the deepening economic slowdown in China. Rio Tinto plans to invest $1.9 billion to expand bauxite output. Royal Bank of Scotland booked a loss of £265 million in the fourth-quarter. Pennon net surges 7%.[/R]

European markets headed south on Friday following a sharp decline in Chinese equities, prompted by government investigation of large brokerage houses and deteriorating domestic economic data.

Mining companies led the decliners on the worries that the slowdown in China may dent sales further.

The government reports show that October industrial profit in China fell 4.6% in comparison with the year-ago period.

Additionally, the Chinese government is investigating violations at two main brokerages.

In the UK, the seasonally adjusted service sector index jumped 2.7% in September from a year ago. The largest contributions came from business services, finance, distribution, hotels and restaurants, the Office of the National Statistics said.

In London trading, FTSE 100 index fell 15.27 or 0.2% to 6,377.92 and in Frankfurt the DAX index slid 4.30 to 11,316.46.

In Paris, CAC 40 index edged up 2.28 to 4,948.30.

Resource sector decline was led by Anglo American with a loss of 7.7% and BHP Billiton lost 3.5%.

Pennon Group PLC jumped 3.5% to 866 pence after the U.K.-based utility company reported pretax profit rose 6.8% to £106.8 million for the six months ending in the September.

Revenues for the period slid 0.5% from a year ago to £689.1 million.

Rio Tinto Limited fell 2.77% to 2,208 pence after the mining company decided to invest $1.9 billion in the Amrun Project to expand its bauxite output.

The Amrun Project involves the construction of a bauxite mine, processing and port facilities.

In London, CEO Sam Walsh said initial output will be 22.8 million tons per year.

Production and shipping is expected to commence by 2019, while the majority of capital expenditure is scheduled for 2017 and 2018.

Royal Bank of Scotland Group Plc fell 0.1% to 306.90 pence after the financial institution competed a tender on senior debt securities.

The bank estimated that it will book a related loss of £265 million in the fourth quarter.

The savings related to the transactions are estimated at £455 million over the next 12 years.