Last updated: July 7, 2014 10:12 pm

Peabody leads miners lower

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The energy and mining sectors were among the worst performing on a listless Monday as broker Deutsche Bank cut its rating on Peabody Energy, the largest US coal miner, and warned that weaker currencies would weigh on many closely tracked mining companies.

Coal miners, which have been hamstrung by the shift in energy production in the US, particularly to natural gas, as well as President Barack Obama’s push to reduce greenhouse gas emissions, extended declines this year.

“Upstream miners continue to be bogged down by China’s muted performance,” analyst Jorge Beristain said.

“Weaker currencies have also robbed certain commodities of prior price-support arguments and it is a Mexican stand-off to see who shuts capacity first in met coal.”

Coal constituted less than 40 per cent of power production in 2013 in the US compared to more than 50 per cent a decade earlier.

The investment bank said Peabody, which tallied sales of $7bn in 2013, would struggle against “muted” coal prices, forecasting a 3 per cent sales decline this year.

Shares in Peabody closed down 3.67 per cent to $16, after Mr Beristain lowered his rating to hold from buy and cut his price target to $19.

Peabody has underperformed the broader energy sector since the beginning of the year, falling 17 per cent compared with a 12 per cent advance by the Dow Jones global energy index.

Deutsche remained optimistic for some mining and energy businesses, including Consol Energy.

Deutsche lowered its rating on Coeur Mining to hold from buy, sending its shares 5.28 per cent lower to $8.79. Consol shares fell 2.52 per cent to $44.55.

BioDelivery Sciences shares jumped 8.92 per cent to $13.06 after the company said results from a late-stage experimental pain medication study met its primary goals.

The announcement triggered a $10m payment from Endo International, which entered a partnership with BioDelivery in 2012 to develop the drug for chronic pain.

Shares of Endo International declined 2.54 per cent to $67.50 after advancing earlier in the day.

Archer Daniels Midland, one of the world’s largest food commodity traders and processors, said it would pay €2.3bn to acquire Wild Flavors, a Swiss-based drink flavours company backed by KKR.

ADM said the all-cash deal should close by year-end, subject to regulatory approvals.

The sellers include Dr Hans-Peter Wild – son of founder Rudolf Wild – who owns 65 per cent of the shares, and private equity shop KKR, which acquired a 35 per cent stake in the company in 2010.

“Natural flavour and ingredients is one of the largest and fastest-growing consumer trends in both developed and emerging markets,” ADM chief executive Patricia Woertz said.

The disposal highlights the increasing competition for deals in Europe as more companies consider acquisitions amid signs of economic recovery. Shares of ADM rose 1.59 per cent to $46.50.

Shares of GT Advanced Technologies declined 15.60 per cent to $16.50 after UBS lowered its rating on the technology company to neutral from buy.

Overall, US equity markets pulled back from record heights reached on Thursday when the Department of Labor said job growth accelerated in June.

Investors are awaiting results from several US bellwethers, which kick off the second-quarter earnings season this week.

Overall, companies on the S&P 500 are forecast to post average earnings growth of 6.6 per cent for the quarter.

Alcoa will release its results after the stock market closes on Tuesday followed by US bank Wells Fargo on Friday.

The S&P 500 fell 0.39 per cent to 1,977.65 while the Dow Jones Industrial Average dipped 0.26 per cent to 17,024.21. The Nasdaq Composite declined 0.77 per cent to 4,451.53.

eric.platt@ft.com

Twitter: @ericgplatt

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