Sector movers: Miners fall after Chinese inflation data

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LONDON (ShareCast) - Inflation data in China was providing a drag on the mining sector in London as higher-than-expected price rises in December sparked speculation about tighter monetary policy.

Chinese consumer price inflation rose to 2.5% in December, from 2.0% the month before, as cold weather resulted in an increase in food prices. The consensus forecast was for a reading of 2.3%.

"While the figure remains well below the inflation target of 4%, it has raised concerns that it could lead to a tightening of monetary policy in the first half of this year," according to market analyst Craig Erlam from Alpari. "The loosening of monetary policy appears to have been largely responsible for the improvement witnessed in the economy in the fourth quarter," he said.

FTSE 100 (FTSE: ^FTSE - news) mining peers BHP Billiton (NYSE: BBL - news) , Antofagasta (Other OTC: ANFGY - news) , Rio Tinto (Xetra: 855018 - news) , Kazakhmys (LSE: KAZ.L - news) and Anglo American (LSE: AAL.L - news) were trading firmly in the red in afternoon trade.

The sector has been dampened further by comments from RBC Capital Markets, which recommended that clients hold fire on mining stocks for now.

"The miners have had a strong start to 2013, but are trading around our target prices. Despite our belief in increased fund flows to the sector this year, economic growth is not stellar and we believe a significant re-rating in the miners will be driven by free cash flow generation which we forecast closer to 2014E."

While earnings are also expected to recover in 2014, RBC said that, on average, earnings per share will come in 25% below 2011 levels for the majors.

"We see the coming year as a year of continued consolidation within the industry and we think investors will again need to be select in both exposure and timing when investing in the sector," analysts said.


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BC