Chinese Data Lifts Miners While ConvaTec Tumbles

ONDON (Alliance News) - Large-cap miners were the best performers in London on Monday at midday, boosted by strong Chinese producer price inflation, while ConvaTec was rooted to the bottom of the FTSE 100 index after lowering its full-year organic revenue forecast.

Meanwhile, attention remains on Spain after the Madrid government said Catalonia's independence bid must be formally withdrawn by Thursday, in response to a statement from Catalan leader Carles Puigdemont earlier on Monday which failed to clarify the region's independence stance.

The FTSE 100 index was just 3.22 points higher at 7,538.66 Monday midday. The mid-cap FTSE 250 index was 0.1% lower at 20,238.70, and the AIM All-Share index also down 0.1% at 1,029.80.

The BATS UK 100 index was down 0.1% at 12,819.08. The BATS 250 was down 0.2% at 18,474.16, while the BATS Small Companies was similarly 0.2% lower at 12,448.95.

"The FX market is showing a significant divergence between the pound and euro, with traders selling the single currency amid ongoing fears surrounding events in Spain," said IG market analyst Joshua Mahony.

The euro was quoted at USD1.1803, down from USD1.1837 at the European equities close on Friday. The pound was flat at USD1.3299 compared to late Friday.

Earlier on Monday, ahead of the 0900 BST deadline set by Spanish Prime Minister Mariano Rajoy, Puigdemont sent a letter to Rajoy stating Catalonia's independence bid should be the subject of negotiations for "the next two months".

"In the next two months, our main objective is to invite you to a dialogue" and allow "international, Spanish and Catalan" mediators to "open a path of negotiation", Puigdemont wrote.

In his letter, Puigdemont did not state clearly whether his region had formally declared independence from Spain, but noted that Catalonia's parliament has a "democratic mandate" to do so after the disputed October 1 referendum.

"It is not difficult to return to reason in these [next] three days," Spanish Deputy Prime Minister Soraya Sanchez de Santamaria said in response to Puigdemont, in a statement made on Monday.

The deputy premier criticized Catalan leader Puigdemont for failing to give a clear answer on whether his region had formally declared secession from Spain.

"It was not difficult to say 'yes' or 'no'," she said.

"There is a good chance that we will see the downward pressure of the euro continue apace as the week goes on," noted IG's Mahony.

Even positive eurozone surplus data for August was unable to lift the single currency.

The trade surplus rose to a seasonally adjusted EUR21.6 billion in August from EUR17.9 billion in July, data from Eurostat showed Monday. Exports increased 2.5% from previous month, while imports rose 0.4%. On an unadjusted basis, the trade balance showed a surplus of EUR16.1 billion compared to a EUR17.5 billion surplus in the previous year.

Year-on-year, exports grew 6.8% and imports climbed 8.6% in August.

"The widening of the euro-zone's trade surplus in August adds to the evidence that the region's economy performed well in the third quarter. And the outlook for exports is bright," commented Capital Economics.

In European equities, the CAC 40 index in Paris was up 0.1% and the DAX 30 in Frankfurt was 0.2% higher Monday midday.

Elsewhere in Europe, UK Prime Minister Theresa May is heading to Brussels on Monday for talks with European Union chiefs in a push to break the deadlock over Brexit.

The prime minister will meet chief negotiator Michel Barnier and Commission President Jean-Claude Juncker just days after they said exit negotiations had reached a "deadlock".

Downing Street sources insisted the meeting had "been in the diary for weeks" but the announcement caused surprise in Westminster and comes after last week's negotiations ended with little movement.

May, who will be joined by Brexit Secretary David Davis, is expected to have discussions with European counterparts over the coming days ahead of a meeting of all EU leaders later in the week.

Blue-chip miners were higher on Monday as commodity prices advanced and Chinese inflation data for September met expectations.

China's producer price index, which reflects the costs of goods at the factory gate, rose 6.9% year-on-year in September, official data showed.

"These price gains were in excess of most market expectations and driven by an increase in raw materials and construction spending, as the Chinese economy continues to feel the effects of a much stronger than expected economic performance this year," said CMC Markets chief market analyst Michael Hewson.

The Chinese government targets around 6.5% expansion for the whole year of 2017. The National Bureau of Statistics is expected to publish third-quarter GDP data on Thursday.

"As a result, we've seen copper prices push up to their highest level in three years, while palladium prices also rose to their best levels since 2001," said Hewson.

Antofagasta was up 3.2% at midday, while Rio Tinto was up 2.0%, BHP Billiton up 2.1%, Anglo American up 1.6%, and Glencore up 1.9%.

Rio Tinto, Anglo American and Glencore hit their highest levels in the year to date earlier in Monday's session, at 3,805.50 pence, 1,509.50p and 385.28p respectively.

Weighing on the index of large-caps was ConvaTec, down 21%.

The wound dressings maker lowered its full-year organic revenue growth expectations on the back of supply issues relating to the company's Advanced Wound Care manufacturing lines and Ostomy manufacturing lines.

The company said third-quarter group revenue grew 6.8% to USD445.5 million from USD417.4 million in the comparative period a year ago. The quarterly performance, however, was severely impacted by the supply issues and a lower-than-anticipated revenue contribution from new products.

ConvaTec now anticipates full year organic revenue growth to be between 1% and 2%, with the outcome being dependent on resolution of remaining supply issues, fulfilment of back orders, and recovery of orders in both Advanced Wound and Ostomy Care in the final quarter of the year.

The warning saw ConvaTec's biggest share fall since its listing in October 2016, with GBP1.20 billion wiped off its total market value on Monday. Shares hit an all-time low of 215.00p earlier on Monday, giving the company a GBP4.20 billion market capitalisation.

GKN was the second worst performer in the FTSE 100, down 2.0% at 311.70p, a host of broker downgrades on Monday adding to woes experienced on Friday.

Societe Generale downgraded the engineer to Hold from Buy, while UBS, Barclays and JP Morgan cut their price targets to 360p, 370p, and 378p respectively.

GKN on Friday warned charges will hit its profit for the full year, and it reported a disappointing third quarter of 2017, with operational challenges and an underperformance in the US leading to lower trading margins.

In the FTSE 250, Provident Financial was the best performer, up 6.6%, extending Friday's gains.

The subprime lender on Friday said a recovery plan for its home credit business has been developed under new leadership to "re-establish relationships with customers, stabilize the operation of the business and improve collections performance."

Provident also confirmed that no dividend will be paid in 2017, following the scrapping of its interim dividend in August, and said the search for a new chief executive is underway. Previous CEO Peter Crook resigned in August after the firm's second profit warning of 2017.

Polymetal International was up 1.7% after it said revenue grew during the third quarter, as gold sales rose on the back of higher output and prices.

Total sales for the quarter, which ended September 30, grew 17% on the same period the previous year to USD546.0 million, with gold sales rising 50%.

Polymetal said it achieved a record production of gold equivalent for the quarter, reaching 470,000 ounces, a 26% increase on last year. This was driven, the company said, by "strong" contributions from the fully operating Svetloye heap leach operation and Mayskoye oxide ore processing, both in Russia.

Stocks in New York are called for a flat to higher open on Monday, with the Dow Jones Industrial Average and Nasdaq Composite called up 0.1%, and the S&P 500 index seen flat.

"US markets having finished last week at record highs look set to start another busy earnings week on the front foot, with all eyes set to hone in Netflix's third quarter numbers after the company's bumper subscriber numbers from its previous quarter," said CMC's Hewson.

Also in the US on Monday, the New York empire state manufacturing index for October is due at 1330 BST, while the September monthly budget statement is at 1900 BST.