By Carla Mozee, MarketWatch
Tesco upgraded to outperform
LONDON (MarketWatch) -- U.K. stocks dropped sharply Wednesday,
led by a slide in mining stocks as copper prices tumbled after the
World Bank downgraded its forecast for global growth.
The FTSE 100 fell 2.3% to 6,390.37., hurt even more than other
major European benchmarks because of its heavy weighting of
commodity-related shares.
Mining stocks logged the worst performances in London trade as
copper prices fell to levels not seen since mid-2009 on concerns
about a supply glut. Meanwhile, the World Bank on Tuesday said it
now expects the global economy to expand 3% in 2015, down from its
earlier forecast of 3.4%. Strengthening in the U.S. economy and the
fall in oil prices won't be enough to offset troubles in the
eurozone and emerging markets, the institution said.
In the mining group, shares of copper producers Antofagasta PLC
and copper miner Fresnillo PLC fell 6.5% and 4.6%, respectively.
Glencore PLC tumbled 12%, Anglo American PLC lost 9.6% and Rio
Tinto PLC (RIO) declined 5.6%.
BHP Billiton PLC (BHP) shares gave up 7.8%. S&P Capital IQ
on Wednesday downgraded its rating on BHP to hold from buy. "We
expect weaker commodity prices to increasingly impact on group
profits as hedges expire and see currency headwinds from a stronger
[U.S. dollar]," Clive Roberts, S&P Capital IQ equity research
analyst, said in a Wednesday note.
BHP's next update is due on Jan. 21, with the release of its
December 2014 operational review.
For copper, both "the negative momentum and the technical
situation suggest that the price slide could continue for the time
being," said commodities analysts at Commerzbank in their daily
report. But when "prices bottom out, the countermovement could
therefore be pronounced."
Some stocks that had been higher lost ground during the
afternoon. AstraZeneca PLC (AZN) shares flipped 0.7% lower. The
shares had been up after the drug maker said a study of its
blood-thinning Brilinta tablets showed they reduced the risk of
heart attack in patients who have had previous attacks.
Luxury-goods maker Burberry posted better-than-expected
same-store sales growth for the third quarter. Shares turned 1.7%
lower.
But Tesco PLC shares rose 2.2%, topping the FTSE 100 after a
ratings upgrade to outperform from neutral at Exane BNP Paribas.
After being "mismanaged," Britain's largest supermarket chain
operator "now has a very credible new CEO who is rapidly driving
changes, motivating staff and improving sales," analyst John
Kershaw wrote.
Tesco shares held to higher ground after S&P during
afternoon trade downgraded the company to junk status, bringing its
rating to BB+ from BBB-. The turnaround measures Tesco recently
outlined "do not go far enough to support an investment-grade
rating," said S&P in a statement.
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