China falls deeper into deflation territory, hitting markets, as UK house asking prices drop – business live

Anglo American share price picks up amid takeover chatter

Alex Lawson

Mining company Anglo American has seen a tentative recovery in its share price on Monday after takeover chatter buoyed the London-listed business.

Shares rose 1.5% to £18.29, valuing the business at £24.5bn, after a pummelling last week which exposed the company to a potential bid. Anglo’s stock is down nearly 45% this year, and the shares suffered their biggest one day fall since the financial crisis on Friday, down 19%, when the miner slashed its production outlook.

Anglo, which is among the 20 biggest companies on the FTSE 100, said difficulties at its mines in Peru and Chile had led to the cut in its forecasts for copper production. Brokers at Jefferies, Barclays and RBC have cut their target price for the stock in response.

Analysts noted that that £30bn had been lost from the value of the company, which is also listed in Johannesburg, since South African Duncan Wanblad, a company insider, had taken over as chief executive from longstanding boss Mark Cutifani in April 2022.

Jefferies analysts have said that Anglo may become “involved in the broader trend of industry consolidation” and suggested Glencore could be a potential suitor.

Glencore took over Xstrata, the company which made an abortive attempt to merge with Anglo in 2009. Xstrata was later subsumed into Glencore.

Anglo notched up profits of $4.5bn in 2022 but issues with iron ore and copper production have hit performance and it is in the process of a cost cutting exercise, which has seen it cut $500m of cuts including job losses.

The company also owns diamond miner De Beers, which has experienced a downturn in the diamond and platinum sectors amid weak demand and too much stock in the market.

More consolidation in the energy sector has just been announced, with US producer Occidental Petroleum winning an auction to buy CrownRock, an energy producer in the west Texas area of the Permian basin.

Occidental is acquiring CrownRock in a mixture of cash and stock in a transaction valued at approximately $12.0 billion, including taking on CrownRock’s debt.

Occidental says the deal will add 170,000 barrels of oil equivalent per day to its output, and also give it around 1,700 undeveloped locations where fossil fuels can be produced.

To fund the transaction, Occidental will issue $9.1bn of new debt and $1.7bn of shares.

But it is also lifting its dividend by $0.04 to $0.22 per share.

Sky News are reporting that the chairman of fast-fashion giant Shein has held talks with the London Stock Exchange about the possibility of staging a blockbuster public listing in the City.

Donald Tang’s meeting with LSE executives comes despite Shein having filed papers in the US paving the way for a flotation in New York.

Sky News’s Mark Kleinman writes:

City sources said the discussions were focused on the possibility of a listing in the UK, with one saying that the Singapore-based behemoth was continuing to explore various options for raising capital through a public share sale.

A US listing remains the likeliest outcome for Shein, according to bankers and people close to the company, while a dual listing in both financial centres is said to be unlikely.

Passenger numbers at Heathrow are creeping closer to their levels before Covid-19 disrupted the travel sector.

Passenger numbers at the UK’s largest airport were just 2% below pre-pandemic levels last month, with 6.1 million passengers using its terminals in November.

That’s only slightly below the 6.2m in November 2019, and 10% more than a year ago – but below the 6.9 million who used Heathrow in October.

Demand for flights to North America peaked before Thanksgiving, with more than 50,000 passengers flying across the Atlantic from Heathrow on November 17, the last Friday before the holiday.

Diwali celebrations also sparked a surge in travel to India.

Heathrow CEO Thomas Woldbye said:

“For so many, holidays and cultural festivities are all about spending quality time with friends and family. Last month saw passengers travelling to celebrate Thanksgiving and Diwali with their loved ones, and we are making final preparations for the Christmas getaway.

Heathrow predicts that passenger numbers will be strong in December, with departure numbers predicted to peak in the week before Christmas Day.

It emerged yesterday that Saudi Arabia could take effective majority control of Heathrow, with other investors considering selling their stakes.

Ethiopia is on the verge of becoming the latest African country to default on its debts since the Covid-19 pandemic hit the global economy.

Ethiopia’s government warned on Friday that it will not meet a $33m interest payment that is due to be paid to holders of a $1bn international bond.

If it misses the payment, then Ethiopia would be on track to default after the grace period of 14 days expires, joining Zambia and Ghana as sovereign debt defaulters.

Ethiopia’s finances have been hit by the cost of the pandemic, and also the civil war in its northern Tigray region, leaving it with double-digit inflation, and a shortage of hard currency.

Today, a senior finance ministry official said Ethiopia will hold an investor call with its international bondholders on Thursday,

Last month, Ethiopia agreed an interim debt-service suspension deal with its official creditors, which gave it some breathing space.

The finance ministry said in a statement on Monday that it would “seek a broadly similar treatment” from the holders of its single $1bn international bond, which matures in December 2024.

It says:

“In light of recent agreements entered with our other external creditors around external debt service suspension, it would be important to treat all our creditors equitably”

Eyob Tekalign, State Minister of Fiscal Policy and Public Finance, told Reuters in a text message that “authorities’ intention is to remain current on our obligations”, adding:

“We will have a call with our Eurobond investors on Thursday December 14th.”

Here’s some expert reaction to Rightmove’s report that UK house asking prices have dropped nearly 2% month-on-month.

Tom Bill, head of UK residential research at estate agent Knight Frank, says politics is the major source of uncertainty in the property market:

“It’s not often that November is busier than September in the UK property market but it was this year. The economic backdrop has stabilised in recent weeks and gentle downwards pressure on mortgage rates means that transaction volumes should be higher over the next six months than the last six.

The main uncertainty facing the property market has gone from ‘when will the bank rate peak?’ to ‘when will the general election take place?’”

Victoria Scholar, head of investment at interactive investor says Rightmove’s report, predicting a 1% drop in prices in 2024, are a reality check:

December is typically a slow time of the year for housing transactions amid the Christmas celebrations and school holidays. However, this year, the fall was above average, highlighting the strain from higher mortgage rates, a weak consumer and broader cost-of-living pressures that are deterring individuals and families from buying a property.

While the latest data from Halifax and Nationwide painted a rosier picture, Rightmove’s figures are a reality check, showing how ‘higher for longer’ interest rates continue to dampen demand for property transactions.”

Jeremy Leaf, north London estate agent, says the drop in asking prices shows that sellers are showing realism to attract buyers.

Leaf adds:

‘Asking prices are not values but often an agent’s aspirational starting point to marketing. Overall, sales agreed are down as transactions are inevitably taking longer bearing in mind weaker demand and higher base rates. However, recent reductions in mortgage rates, and inflation not rising quite as rapidly, has given the market a bit of a kick when needed.

‘Looking forward, the Christmas period is likely to be quieter at least until Boxing day which is always a great time for attracting interest on the portals and although much interest is aspirational, we always find plenty of genuine interest too.’

The UK’s housing market is also undergoing a bout of deflation.

Rightmove has reported that the average asking price of a UK home tumbled by nearly £7,000 in December, to £355,177, a drop of 1.9%.

Rightmove also reports that average asking prices set by new sellers are 1.1% lower than a year ago, with the number of sales agreed this year around 13% lower than the same period in “the more frenetic” 2022.

Prices in seven out of 11 regions are higher than a year ago, Rightmove reports, adding:

The North West leads the way, up by 1.5% compared to last year, while the South East is the worst performer at 3.7% below 2022.

Here’s the full story:

Tim Bannister Rightmove’s Director of Property Science, has said:

“2023 has been an interesting year, with very little straight forward, yet far from the negative market it might have been given the broader economy.

Whilst there has been a lower transaction level than the previous few years and some adjustment in values, attractively priced property is selling. Very prime coastal property has held firm and sold well and sensible sellers who are realistic about guide prices are achieving positive results. There is less risk taking and the fluctuation of mortgage rates has made it a bumpy road for some, but as we turn towards 2024, we are hopeful that activity will continue despite a general election.

Our advice to both buyers and sellers is to be realistic with expectations, it is potentially an easier market for buyers in prime areas with more choice and less pressure. Vendors; get organized, take early interest seriously and above all pitch values at an attractive level from the outset.”

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

While most of the advanced world is struggling with inflation, China has the opposite problem.

The world’s second-largest economy has dropped further into deflation territory, with consumer prices falling last month, new data released last weekend shows.

China’s consumer price index (CPI) dropped 0.5% on a monthly basis in November, showing that prices of a basket of goods and services fell compared with October.

CPI was also 0.5% lower on an annual basis, China’s National Bureau of Statistics (NBS) reported, which is the steepest drop since November 2020.

The drops have disappointed investors, as they indicate rising deflationary pressures as domestic demand remains subdued.

Kyle Rodda, senior financial market analyst at capital.com, says:

Chinese stocks have sunk as investors digest the weekend’s disappointing price data. Deflation is deepening, and while debate rages about why, the trend is undeniable: consumer prices are falling, and producer prices have been negative for more than a year. The data simultaneously indicates anaemic demand and the eroding profitability of Chinese companies.

The latest pledges of deeper fiscal support from last week’s Politburo meeting have amounted to little and may be considered insufficient to spark the economy out of this rut.

China has already dropped into deflation back in August, before prices rose again in September – but that recovery proved temporary, with prices also having dropped in October.

Zhang Zhiwei, chief economist at Pinpoint Asset Management, said deflationary pressures have increased because of weak domestic demand, adding:

“This highlights the importance of more supportive fiscal policy.”

In another sign of deflation, China’s manufacturers are cutting prices too. China’s producer price index fell 3% year-on-year, compared with October’s 2.6% drop, which is the 14th decline in a row.

The data, released last weekend, has knocked stocks today. China’s CSI 300 index, which tracks stocks on the Shanghai and Shenzen exchanges, fell as much as 1.4% today.

But the economic picture may be brightening in the UK, after a troubled year.

Manufacturing body MakeUK has reported a pick-up in business confidence.

And encouragingly, manufacturers reported that export orders surpassed domestic orders for the first time in four years. That suggests that companies are taking advantage of either faster growing or new markets.

Fhaheen Khan, senior economist at Make UK, said:

“After the economic and political shocks of the last few years there is some semblance of stability returning for manufacturers.

While growth is not exactly supercharged, the positive announcements in the Autumn statement can at least allow companies to plan with more certainty without having to constantly fight fires.”