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FTSE 100 at the close: Fresnillo, Rio Tinto, Melrose Industries


By Patrick Munnelly, Market Strategist, Tickmill

The FTSE 100 index in the UK surged to a one-month high on Monday before tapering off slightly to close with a modest gain of 0.25%.

The initial surge in positivity was driven by the performance of mining companies, which saw a boost following robust economic data from China, indicating stability in the world’s second-largest economy.

China’s economic indicators for August were promising, with consumer prices returning to positive territory.

Additionally, the country witnessed a significant increase in new bank loans, surpassing expectations.

These developments signalled a positive trend in economic stability for China, particularly in its role as the leading consumer of industrial metals.

As a result, shares of industrial metal mining companies enjoyed a substantial gain of 2.8%.

FTSE 100 biggest movers

Among the top performers on the FTSE 100, Fresnillo [LON:FRES] led the way with a remarkable 4.6% increase, closely followed by Rio Tinto [LON:RIO], up 3.4%, and Antofagasta [LON:ANTO], which saw a gain of 2.9%.

It’s important to note that China-exposed mining stocks have faced volatility and concerns about slowing demand throughout the year.

This is primarily due to the challenges faced by China, the world’s largest consumer of both oil and metals, in revitalising its sluggish economy. Despite the year’s challenges, the positive data from China provided a much-needed boost to the FTSE 100 index.

On the negative side of the ledger Melrose Industries [LON:MRO] saw its stock price, falling by 5%.

This decline was a result of RBC Capital Markets downgrading their rating on the company from “outperform” to “sector perform.”

Despite this downgrade, RBC did raise the price target for Melrose to 540p, up from 525p.

This change in rating came after the British aerospace supplier had recently increased its annual operating profit outlook by more than 8%.

This boost was attributed to higher profit margins in its engines division.

Investors had initially responded positively to this news, but RBC Capital Markets seemed to take a more cautious stance.

The brokerage firm acknowledged the potential for further earnings upgrades and the upcoming share buyback program scheduled for October.

However, they noted that these factors were already well-known among investors.

Additionally, RBC Capital Markets expressed scepticism about the potential for surprise in terms of earnings per share (EPS) upgrades, citing the company’s historically conservative management approach.

RBC Capital Markets pointed out that Melrose’s management appeared inclined to provide conservative guidance, which might limit the extent of any positive surprises in the future.

Despite this recent setback, it’s worth noting that Melrose’s stock had seen a remarkable 75% year-to-date increase as of the close of trading on Friday.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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