FTSE 100 falls again on China woes, but Inmarsat soars

After the volatility last week which helped leading shares record their worst month since May 2012, September has begun in similar fashion.

The correction largely caused by China’s surprise devaluation is continuing after weak August manufacturing data from the country, with the FTSE 100 currently down 146.42 points or 2.3% at 6101.52.

With China a major consumer of commodities, and any weakness putting more pressure on prices, mining shares are again among the leading losers. Glencore is down 8.15p or 5.4% at 140.15p, BHP Billiton is 50p lower at £10.82 and Anglo American has fallen 33.7p at 707.3p.

Technology stocks are also under pressure following positive performances last week, with chip designer Arm down 29p at 904.5p on concerns about Asian growth.

As well as the Chinese data, the European purchasing managers index slowed marginally in August although the performance was steadied by a strong result from Germany, while in the UK, the PMI fell from 51.9 to 51.5, lower than the expected 52.

Among the few risers was satellite communications business Inmarsat, up 6p to 987p as it confirmed the successful launch of the third satellite in its Global Xpress system. The launch, delayed after accidents with the Russian launch rockets, means Inmarsat hopes to start providing high speed mobile broadband services by the end of the year. Chief executive Rupert Pearce said:

We have been working towards this day ever since we announced plans to create the Global Xpress constellation in 2010.

This is a significant milestone for Inmarsat.... Global Xpress will deliver broadband speeds that are an order of magnitude faster than our fourth generation constellation, to customers on the move on land, at sea and in the air, globally.

Morgan Stanley issued an overweight rating on the shares with a £10.80 price target following the launch:

Expect an acceleration in customer commitments to GX: Inmarsat targets $500m per annum of incremental revenues from Global Xpress. Although the company has already secured pre-capacity commitments of around 30% of the total first five years’ revenue, there is still a significant group of customers waiting on the sidelines.

We adjust our estimates to reflect the latest launch and also the last launch delay from Proton in May. Revenues are down 4% in 2015, but this is mainly timing and offset in outer years with no change in the overall revenue opportunity for GX. However, our 2015 earnings per share rises from lower interest charges (one-off costs from refinancing with a bond issue last year, lower capitalising of interest as satellites go into use, and lower underlying interest rate).

Elsewhere Ocado is up 12.3p at 355.1p as Exane BNP Paribas raised its rating on the online grocery business from underperform to neutral, and lifted its target price from 260p to 325p.

Lower down the market Latchways jumped 47% to 1067.5p after the safety specialist recommended an £11 a share, £124m offer from US group MSA Safety. Analysts at Peel Hunt said:

In our opinion, the price is a decent one as it equates to 15 times 2016 estimated EBITDA, which is comparable to the around 14 times multiple paid for peer Capital Safety Group in June when it was acquired by 3M.