BHP Billiton slumps as miners fall

On a poor day for FTSE 100 mining shares, BHP Billiton suffered the most as investors eyed the looming spin-out of South32.

Shareholders are due to approve the formation of the new company on May 6 and shares in the Perth-based business will start trading in Sydney, Johannesburg and London later in the month. The stock will make its debut amid lacklustre demand for commodity shares.

Since BHP Billiton announced the demerger of its aluminium, coal, manganese, nickel and silver assets last August, metals prices have tumbled and mining shares have fallen in tandem. The sell-off has been so severe that analysts at Investec on Monday said that South32 was now worth $6.6bn (£4.5bn) less than when they first estimated its valuation back in September.

“Unfortunately for BHP Billiton and South32, the divestment process has been progressing steadily into an increasingly bearish commodity price market, such that our potential valuation for the spin-off has been in continual decline,” they said. Having initially valued the new entity at $18.6bn, the analysts now reckon South32 only has a valuation of about $12bn.

Given BHP Billiton’s share price reflects the market’s estimates for South32, Investec’s forecast cut dragged on the miner and the stock closed 47½p lower at £14.16, a 3.2pc loss.

BHP was the heaviest faller in a FTSE 100 that lost 25.47 points to 7,064.3, a 0.4pc decline that pulled Britain’s benchmark index away from the record high it reached on Friday. Irrespective of South32, mining shares were broadly out of favour and dragged on the index, with Antofagasta falling 18½p, or 2.5pc, to 722p and Anglo American down 23½p at 998.7p, a 2.3pc slide.

Unexpectedly poor trade data from China – the world’s biggest commodities consumer – rattled resources stocks, as did UBS and Citigroup, which added to the recent chorus of bearish commentary on iron ore prices.

Citi analysts, like those at Goldman Sachs last September, on Monday declared the “end of the iron age” and cautioned: “We think it is going to be a tough one to two years for the mining sector until we clear the surplus capacity in the bulk commodity prices”.

Still, iron ore giant Rio Tinto, 23p, or 0.8pc, cheaper at £28.14, recorded a fall that was softer than many of its peers, supported by continuing hopes that Glencore might still buy the miner.

Since Glencore’s bid interest first emerged last October, the metals market has weakened significantly, but “we still see the deal as accretive for Glencore shareholders at consensus commodity price expectations”, Bernstein analyst Paul Gait advised clients.

Away from the miners, Pearson, the education publisher, finished 28p lower at £14.42 following negative analyst comment from both Jefferies and Liberum. Downgrading to “underperform”, analysts at the former broker told clients that the rise of free, digital education materials meant the next decade would be “profoundly challenging” for Pearson. The Liberum experts, meanwhile, focused on professional networking business LinkedIn’s $1.5bn acquisition of education website Lynda.com that was unveiled last Thursday.

Not only does the deal illustrate “LinkedIn’s interest in the education sector”, but “more importantly, LinkedIn is likely to be the best-positioned company, longer-term, to demonstrate the real value of education as it will be able to track students’ longer-term career progression”, the analysts said. Pearson risks “being seen as an education content company, just when that content is becoming increasingly free”, they concluded.

Aviva bucked the weak broader market to close 6½p better at 561½p. Today marked the first time investors could buy shares in the insurer since it completed its purchase of Friends Life on Friday.

It helped sentiment towards the new, combined entity that Barclays, JPMorgan, and Morgan Stanley - which had been restricted from publishing research on Aviva because they worked on the deal - all advised buying the stock.

HSBC Holdings gained 5.9p to 618p following an encouraging assessment from Morgan Stanley analysts. In the light of the stock’s recent underperformance, HSBC’s “valuation is more appealing relative to European banks”, the analysts told clients, adding that “the circa 6pc headline dividend yield should appeal to yield-hungry investors and looks sustainable”.

Other banks rallied during the afternoon when a new Guardian/ICM poll gave the Conservatives a six-point lead. A Labour-led government is viewed as being worse for the banks than one led by the Tories and so investors cheered the poll by sending Royal Bank of Scotland up 4.3p to 353.2p and Barclays 2.4p higher to 259.45p.

Finally, minnow Coms, 0.135p better at 0.7p, was in focus after Dave Breith, who quit as chief executive last month following a boardroom bust-up, sold down his 9.73pc shareholding in the cloud-based communications business to less than 3pc.

M&C Saatchi directors offload £9.6m in shares

Lord Saatchi and four other directors at the advertising firm he co-founded have offloaded stock worth £9.6m that they were awarded for the company’s strong share price performance under their stewardship.

Collectively, the five directors, including boss David Kershaw and chairman Jeremy Sinclair, sold 2.9m shares in M&C Saatchi at 330p a piece, pledging to make no further disposals for a year. Bosses often sell some shares awarded to them under incentive plans to cover tax liabilties, although an M&C spokesman said that in this instance that was not the case. Instead, the group sold the stock “to keep their shareholdings at historic levels and to improve liquidity in the stock”. M&C closed ¼p cheaper at 329¾p.