Market Report: China puts brakes on luxury goods

The news out of China was good for mining stocks but bad for luxury goods shares yesterday. The new Chinese Communist Party leader Xi Jinping spoke out against grandiose displays of power and wealth among his officials. He wants them to look like they are more in touch with the people.

This could be bad news for luxury goods brands in Europe from LVMH to PPR as well as British brands such as Burberry. The huge sales growth in Asia enjoyed by these groups has been driven by gift giving between businesses and officials. Luxury brands have already said that "gifting" cooled off ahead of the change in government. This new decree from by Mr Xi could mean a cut back in lavish gifts.

In London Burberry declined 10p to 1,277p, while over in Paris PPR was down 1.26 per cent but LVMH edged up 0.26 per cent.

In contrast, the miners were in favour after Mr Xi outlined economic policies to ensure stable growth. Tax reform and urbanisation is on his list, as well as permitting the market to have an increased role in setting resource prices. The potential higher demand from China lifted commodity prices and mining stocks made up six of the top 10 risers on the benchmark index.

Kazakhstan focused Kazakhmys, up 26.5p to 740.5p, was at the top of the blue-chip index's leaderboard.

Anglo American rose 43p to 1,780p despite a downgrade of its share-price target by Morgan Stanley analysts from 2,110p to 1,820p. Morgan Stanley's Menno Sanderse conceded that new leadership, following the departure of outgoing chief Cynthia Carroll, "should be able to unlock substantial equity value, but the political and operational changes needed will take time".

Focus on the Chancellor's Autumn Statement didn't mean traders couldn't gossip. Looking across the pond, there were vague rumours circulating that bidders could emerge for US coal company Walter Energy. Rumours were floated in March that Anglo American and BHP Billiton, up 46.5p to 1,998p, could be among those interested. This time BHP is said to be interested again, with one trader also throwing in commodity giant Glencore, up 0.8p to 340.5p, as another candidate.

Oilfield services giant Petrofac won two engineering contracts and Investec's analysts rated the stock a buy with a target of 2,000p. The shares spurted up 23p to 1,651p.

The FTSE 100 index gained 23.04 points to 5,892.08 with very little change even after George Osborne's Autumn Statement.

Joe Rundle, the head of trading at ETX Capital, said: "The UK OBR (Office for Budget Responsibility) Autumn Statement reaffirmed the dire outlook for the country, with GDP forecasts slashed for the next four years.

"The FTSE, sterling and gilts didn't react much, with traders declaring the OBR as a bit of a non-event for financial markets," he added.

It appears any real moves were on hold until investors can get some clarity on the crucial US fiscal cliff issue.

The second-biggest riser on the benchmark index was Tesco.

The tough conditions for the once-unstoppable supermarket group culminated in the likely sell-off of its struggling United States arm, Fresh & Easy, and it ticked up 10.8p to 337.45p on the news.

But a harder time for supermarkets might just help catalogue group Argos, analysts reckon. Supermarkets are focusing their attention back on food, reducing their aggressive assault on other areas, and this should benefit Argos, analysts at Bank of America Merrill Lynch claim.

Bank of America's Richard Chamberlain and his team are so confident that Argos could be in for a better time they have upgraded its parent, Home Retail Group, to buy, giving it a share price target of 130p.

Argos will be a beneficiary of "capacity withdrawal in key categories" from supermarket groups as well as electrical retailers, he said, reckoning the demise of electrical retailer Comet will help. The stock gained 7.7p to 121p.

Bank of America's retail analysts also took a look at bike-to-car accessories retailer Halfords and warned "the shares are now due for a pause".

Halfords has been pedalling hard and has outperformed its retail rivals but analysts gave it a hold rating and a share price target of 350p and its shares reversed 15.1p to 323.2p.

Traders still in the mood for gossip reckoned that Rentokil might be the subject of takeover talk. It caught a 2.6p rise to 93.5p.

On AIM, Rangers Football Club said it has already attracted £17m from investors ahead of its AIM float and plans to raise another £10m via the placement.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before