Glencore Xstrata sinks to record low Glencore Xstrata hit a record low as the London-listed miners plumbed their lowest levels since 2009. Fears of a Chinese credit crunch hit metals prices, sending Glencore 4.7 per cent lower at 273.5p. The stock has nearly halved since flotation two years ago, having never closed above its 530p placing price. Weak metals prices were putting pressure on Glencore to defend its investment-grade credit rating, which is essential to support short-term borrowing at its marketing division, analysts said. But with net debt likely to peak at around $34bn this year while copper, zinc and coal prices were trading at multi-year lows, Glencore was likely to focus on keeping debt to within a threshold of 3 times operating earnings. Hopes for improved shareholder returns before 2015 therefore looked increasingly unrealistic, analysts said. The wider mining sector fell to a four-year low, leading the FTSE 100 down 1.4 per cent, or 87.07 points, to 6,029.10. A five-month low for the FTSE meant it was up just 2.2 per cent for the year so far. Kazakhmys slid 13.3 per cent to 233.7p on news that it had reluctantly backed a takeover offer for ENRC , partly funded with its own equity. Kazakhmys agreed to take $887m in cash and 77m of its own shares in exchange for its stake in ENRC, which closed 1.4 per cent lower at 213.8p. "The sale of ENRC should renew focus on Kazakhmys" challenged mining business, which is currently burning cash at spot copper prices," said Morgan Stanley. We are concerned that the announced cost-cutting initiatives (worth £1 a share) could prove unsustainable and labour reductions might be difficult and fall short of expectations. Even with a lowered cost-base, free cash flow would remain negative at least through 2017 on our estimates. Gold miner Centamin lost 13.3 per cent to 30.9p on a report that its appeal against the annulment of its licence would not be heard until September. J Sainsbury slipped 2.4 per cent to 349.4p and Wm Morrison lost 1.5 per cent to 255.9p. Citigroup downgraded the grocers to "sell" and "hold," respectively, in a European sector review. "In real terms, sector earnings are 12 per cent lower today than ten years ago," Citi said. We expect real-terms decline to continue, or intensify, as space growth diminishes and macro-economic conditions remain harsh. Investing in the sector on the basis of easy monetary conditions and low high-yield bond yields no longer seems, in our opinion, to make so much sense. Diageo slipped 1.1 per cent to £18.23 after Liberum Securities cut the brewer off its "buy" list. Consensus estimates for the quarter ending June look too high while poorly performing acquisitions in Brazil and China would start dragging on like-for-like sales in 2014, said Liberum. The broker also played down the chances of corporate action, seeing new chief executive Ivan Menezes as more likely to act cautiously. Dixons dropped from near a five-year high, down 11 per cent to 38.1p, on more than three times the average daily volume. Dealers blamed Dixons" drop on profit-taking following results last week and on a note from SocGen's credit team suggesting Dixons" cash generation would be poor this year. Car dealership Inchcape slid 3.6 per cent to 458.6p following data showing Russian car sales down 12 per cent year-on-year in May, the biggest monthly drop in more than three years. Russia provides about 13 per cent of Inchcape's operating profit. Among the gainers, Man Group rose 2.9 per cent to 81.1p after Merrill Lynch highlighted a steadier performance last week for AHL, its benchmark hedge fund, in spite of the continuing bond slump. Man shares slumped in early June after AHL was caught by the drop in bonds and Japanese stocks but Merrill reckoned the fund had now reduced bets and switched positioning. "Investors need to move away from the idea that AHL is massively long bonds and rates," the broker said. It is highly unlikely that the system would simply ignore the moves of the past few weeks.