The FTSE 100 is trading at slightly lower levels to yesterday’s close this morning despite the announcement overnight of a further slowdown in the Chinese economy for the first quarter of the year. The 6.7% GDP growth in the first three months of 2016 marks the slowest pace in seven years for the world's second largest economy and has pushed mining stocks firmly into negative territory with Anglo American (LON:AAL), Glencore (LON:GLEN) and Rio Tinto (LON:RIO) all featuring prominently in a list of the biggest losers.
Due to the large weighting of mining stocks in the UK blue-chip index and the inextricable link between them and the Chinese economy, the small declines seen so far are hardly surprising especially when placed in the context of the strong gains seen in this sector so far this week.
Having said that, the latest economic data from China shouldn’t be viewed as entirely negative with increases in industrial production and fixed asset investment clear bright points, and it should also be pointed out that the decline in GDP was widely expected.
Crude prices have taken a fairly sharp leg lower this morning, with the June contract for Brent Oil dropping back below the $44 handle heading into a potentially groundbreaking meeting in Doha this weekend. This Sunday OPEC and non-OPEC members will convene in the Qatari capital with discussions regarding a production freeze at January’s levels expected to be the main talking point. Speculation this past week that an agreement will be reached to curb output has seen oil prices touch their highest level since November, however news this morning that the Iranian oil minister won’t attend the meeting has slightly diminished hopes of a Doha deal.
As for individual oil stocks, BP (LON:BP) has been attracting a lot of attention lately after almost 60 per cent of shareholders voted against CEO Bob Dudley’s proposed £13.8m remuneration package. The stock has recovered fairly well from it’s February low of 252.55 largely due to a resurgence in the oil price, and whilst shares in the “”supermajor” oil and gas company trade pretty much flat on the session they may be worth keeping an eye on as this story is unlikely to go away anytime soon.