Market Report: 'Imminent' end to Chile strike set to boost BHP

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The Independent Online

The strike at BHP Billiton's Escondida mine in Chile in effect ended production at the world's largest copper mine two weeks ago. Although officially the two parties appear to be no nearer a deal, the word in the market is that the strike could end this week.

Shares in BHP nudged only a penny firmer in yesterday's session to close at 1,001p, but traders said rumours coming out of Chile indicate a deal will be struck between the world's largest integrated mining company and local unions sooner rather than later. Analysts believe the strike will dent full-year, pre-tax profits by about only 1 per cent for every fortnight it goes on, but traders expect the shares to rally strongly on the back of an ending of industrial action. Talk of the strike finishing knocked back copper futures prices by nearly 8 per cent.

News that Matt Barrett is likely to be replaced by the former Lazard dealmaker, Marcus Agius, as chairman of Barclays sent the stock 11p stronger to 660.5p. However, Mr Barrett will be comforted to know the Dutch broker, ABN Amro, upgraded its stance to "buy" on Barclays, so it was not just his departure that led to the buying interest. ABN upped its target to 800p for Barclays, on top of reiterating "buy" recommendations for HBOS, 7.5p better at 1,005.5p and Bradford & Bingley, half a penny worse at 445.5p.

The bullish start to trading in the shortened week was boosted as oil dropped briefly to below $70 per barrel after Ernesto, the first hurricane of the season, was downgraded to a tropical storm. However, the Dow quickly moved into negative territory, trimming FTSE 100 gains as the index rose 9.7 to 5,888.3.

The weaker oil price helped airline stocks, with British Airways hitting a five-and-a-half-year high, up 16.25p to 414.25p as traders also noted a rush of short positions being closed. The sector has also been helped by confirmation that Aer Lingus, the Irish national air carrier, will float, indicating better demand among institutions. In the second liners, easyJet attracted good support, up 19.5p at 454.5p, as did Ryanair Holdings, €0.27 better at €7.41.

Man Group, the hedge fund and commodities group, raised its stake in the beleaguered retailer Blacks Leisure, which last Wednesday issued its second profits warning in five weeks. Man is believed to be buying stock on behalf of the retail entrepreneur Mike Ashley, and traders said with Man now controlling more than 14 per cent of the stock, a bid looks increasingly likely. Even so, some traders were happy to continue to take profits as the shares fell 9p to 401p.

Bid talk continues to do the rounds at Cobham, the aerospace group, after chat began last week. The shares added another 4.25p to close at 175.25p on good volume with more than 14 million changing hands. Some traders believe the group could attract a valuation of 210p per share, giving the company a capitalisation of £2.8bn, including £427m of debt.

Although the rights issue at Ashtead Group, 4.75p firmer at 132.25p, was fully underwritten, management will be pleased that more than 96 per cent of the rights were taken up by existing shareholders, with the balance being placed in the market by the brokers JP Morgan, UBS and Evolution Securities. With the rights issue out of the way traders are confident the stock will move back towards 200p again.

In the small caps, Asia Energy shed 40p to 273p in early deals as traders weighed the impact of Saturday's riots in Bangladesh that resulted in six dead protesters. The group has suspended operations at its Phulbari site, potentially one of the world's largest coal deposits, but the word is the Bangladeshi government may give the project the official backing that Asia Energy has been seeking. If it does, the shares could add another 200p, traders said, and late buying saw them close 11.75p worse at 301.25p.

Another small-cap that continues to find little support is BrightThing, the developer of interactive DVDs for children, down 0.75p to 3p. The shares peaked at more than 200p last year, but sales have been poor and traders are beginning to fear the worst.

Crescent Hydropolis Resorts recovered 3.5p to 23p after a wave of selling sent the stock to an all-time low. The group is investing €400m (£270m) in an underwater hotel and resort off the coast of China, but has been plagued by investor pessimism and inactivity. Rumour has it that the group will look for new funding, but with Bond villains thin on the ground these days, there are likely to be few takers.

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