Market Report: Miners come out on top as iron and copper surge

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The Independent Online

The mining sector bucked a losing trend in the wider market yesterday thanks to some very bullish indicators for commodity prices. Rio Tinto soared 20p to 1,779p, Xstrata added 4p to 1,047p, Antofagasta gained 20p to 1,346p and BHP Billiton improved 1.5p to 727.5p. The excitement seems to have been caused by news that Japan's biggest steel maker has agreed to pay up to 70 per cent more for iron ore supplies this year. This is particularly great news for BHP and Rio, whose shares now stand at all-time highs.

The mining sector bucked a losing trend in the wider market yesterday thanks to some very bullish indicators for commodity prices. Rio Tinto soared 20p to 1,779p, Xstrata added 4p to 1,047p, Antofagasta gained 20p to 1,346p and BHP Billiton improved 1.5p to 727.5p. The excitement seems to have been caused by news that Japan's biggest steel maker has agreed to pay up to 70 per cent more for iron ore supplies this year. This is particularly great news for BHP and Rio, whose shares now stand at all-time highs.

However, this development is certainly not good for Corus, 2p weaker at 57p. Rising iron ore prices are likely to squeeze profit margins at the steel maker. In fact, share prices across the European steel sector tumbled as investors worried that manufacturers will struggle to pass on the higher costs to their customers.

Meanwhile, dealers attributed the healthy rise in Antofagasta's stock to news that the price of copper had touched a 16-year high. Moreover, Numis Securities predicts that the rally in copper prices could be about to become more dramatic. It notes that warehoused supplies of the commodity are at critically low levels and it believes that the price of copper could be about to soar.

"The copper market looks to be close to repeating the price spike seen in 1988 when copper inventory levels had fallen to critical levels," said the broker. It believes that any spike this time around will be exacerbated by a number of factors, namely the continuing strength of the US, Chinese and Indian economies.

The wider FTSE 100 index slumped 27.9 points to 5,032.9 as traders were unnerved by the falling dollar and rising price of oil. The FTSE 250 dropped 39.2 to 7,195.2. The strong crude price acted as a boost for the oil sector. BG gained 5.5p to 404p while BP added 2p to 560.5p.

Hays improved 1.75p to 129.75p after Morgan Stanley raised its price target on the recruitment giant to 143p from 135p. The US broker, which has an "overweight" stance on Hays, is convinced that the City is presently far too conservative with its earnings estimates for the company. It predicts that Hays can generate earnings growth of up to 19 per cent over the next three years.

Cadbury Schweppes added 3.25p to 511.25p ahead of today's full year results from the sweets and soft drinks giant. Analysts expect the group to deliver a modest rise in profits. Sainsbury's fell 7.75p to 286.75p as it emerged that one of the Sainsbury family's charitable foundations had sold a 2.6 per cent shareholding in the supermarkets giant. UBS placed 45 million shares at 289.5p on behalf of the foundation, raising £130m. The Sainsbury family and various charitable trust linked to them own more than a third of the company.

Hilton slipped 7.25p to 312.25p after Citigroup Smith Barney slashed its rating on the stock to "sell" from "hold" ahead of tomorrow's results from the hotels group. The US broker told clients that Hilton is unlikely to unveil assets sales or the return of capital to shareholders and so argued that the company looks undervalued on fundamentals. Citigroup also fears that Hilton's bookmaking unit, Ladbrokes, has had a poor end to the year.

Northgate Information Solutions ticked 0.25p better to 65.25p as ABN Amro sold 47 million shares, or 10 per cent of the company, at 63.5p each on behalf of Warburg Pincus. The venture capital giant was an early stage backer of RebusHR, which was acquired by Northgate at the start of last year. The stock was placed by the Dutch broker with institutional investors.

Sportingbet continued its march higher, gaining 16p to 309.5p, after strong second quarter results. DBS Advisers sold 18.7 million shares in the online gaming group at 295p in the wake of the figures. DBS got its holding as a result of Sportingbet's purchase of Sportbook in 2001. Despite the steep rise in Sportingbet's share price over the past year, Dresdner Kleinwort Wasserstein is believed to have had little trouble placing the stock with its clients.

Lower down the pecking order, Marchpole improved 1p to 26.75p as Michael Morris, an executive director at the retailer, bought 100,000 shares at 25.75p. Electric Word added 0.63p to 7.75p after breaking into the black for the first time. The publisher posted a first half profit of £107,000 against a loss of £418,000 last time.

Eidos gave up 7.25p to 56.75p as punters took the view that takeover talks at the computer games software developer are unlikely to succeed. Eidos has now been in bid negotiations for over eight months. During this time trading is said to have deteriorated at the company. Sci Entertainment, down 4.5p at 322p, recently overtook Eidos to become the biggest London listed computer games developer.

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