Leading shares undermining by disappointing Chinese GDP, with metal prices and mining groups under pressure

A smattering of bid talk was not enough to prevent markets moving lower, with mining shares leading the way down.

Disappointing economic data from China – a key market for commodities – hit metal prices, with gold falling to a two year low. China reported a 7.7% rise in first quarter GDP but this was lower than the 7.9% growth achieved in the fourth quarter of 2012 and below forecasts of 8%.

So Randgold Resources is down 366p to £45.92, not helped by Citigroup cutting its price target from £55.40 to £43 and issuing a sell recommendation. Polymetal International is down 57p to 802p while Fresnillo has fallen 79p to £11.94.

Eurasian Natural Resources Corporation has dropped 13.3p to 236.1p, with JP Morgan Cazenove edging down its price target to 295p from 300p.

Overall the FTSE 100 has fallen 68.22 points to 6316.17, despite takeover speculation lifting water shares. United Utilities has jumped 19.5p to 740.5p, a 2.7% rise following weekend reports the company was beefing up its defences against a bid. Infrastructure funds are said to be keen on UK utilities, which has also helped lift Severn Trent 19p to £17.25. But Peter Atherton at Liberum Capital was cautious:

United Utilities has (according to a Sunday Times article) appointed Goldman as an advisor. The Sunday Times says that this is to beef up its defence team against a possible bid, although the company is quoted as saying that the appointment was part of a normal review of advisors. Last week it was Pennon, this week United Utilities.

These rumours do the rounds every few months. The reason they keep re-appearing is that there is some logic. We know that infra funds like UK network assets and especially their inflation protection. But there are several things against a bid. First, we are already into year 3 of this 5 year regulatory cycle. So a bidder would only have 1.5 years left where they know the regulatory settlement. Ofwat are changing a lot in 2015 so a bidder would face considerable uncertainty over the post 2015 cash flow. Second is size, United Utilities has a market cap of £4.7bn so a bidder would need to pay somewhere north of £5.5bn which is probably too big for any infra fund (this is not 2006). So the chance of a bid – 20%.

Still with utilities, Centrica has climbed 1.3p to 380.7p after the British Gas owner linked up with Qatar Petroleum to pay $987m for oil and gas assets in Canada.