Soaring commodity prices drive mining and power stocks to biggest FTSE gains

As the year draws to a close, the number of gainers in the FTSE100 far outstrips the losers

Mining and power stocks were the clear winning sectors on the London stock market this year as companies cashed in on record oil, gas and metals prices.

But the windfall was not evenly shared, with some firms failing to cash in on the bonanza. There was a less clear pattern among the losers although in a year of booming share prices, defensive stocks unsurprisingly made the weakest gains.

"Barring a disaster in the next few weeks, 2006 will have been a good year for equity markets," said Mike Lenhoff, chief strategist at Brewin Dolphin Securities

So far this year just 12 out of the FTSE 100 index of blue chip stocks are down on their price on New Year's Day. One was virtually unchanged while the rest made gains ranging from 1 per cent to 108 per cent.

The cat that took the cream was Xstrata, the mining company whose share price more than doubled in 2006. It was spun out of the secretive Swiss commodity broking giant Glencore, symbolising the massive shift of foreign capital into the City of London.

Lonmin, the long-standing miner, posted a 91 per cent rise while third place was taken by Corus Group, the Anglo-Dutch steelmaker that benefited from rising metals prices - but more importantly from speculation of a three-way bidding war.

Of course the merger and acquisition fever that has gripped the City this year is the story that the graph fails to tell. Investors in a raft of companies were able to cash in massive share price gains as the businesses were snapped up foreign bidders and taken off the FTSE list. Targets for foreign take-overs included BAA, O2 and Abbey - all taken over by Spanish firms - as well as the chemicals giant BOC and the building materials group BPB.

However 2006 was a year of two halves. The mining stocks made their gains in the first half as prices of copper and other metals hit historic highs. But since the global correction that began in May and spilt over into June, they have been treading. "In the early part of the year the key area that we saw was the mining sector, helped by corporate activity," Mr Lenhoff said. He said interest rates and bond yields that were low by historic standards also encouraged investment in equities.

In the second half of the year fixed-line telecoms, real estate, retailers and mobile telephone stocks all made the running.

Thus British Land and Hammerson, the property giants, have posted the 10th and 12th largest gains with Liberty International not far behind. Retailers such as Marks &Spencer, Morrisons, J Sainsbury and Alliance Boots were all in the top third of the index. M&S cemented the recovery that began last Christmas while Morrisons and Sainsbury's benefited from investors' enthusiasm for their long-awaited corporate turn-arounds.

However Home Retail Group, which owns Argos and Homebase, had an unusually large fall of 6 per cent following its demerger from GUS.

Retail stocks face the risk of sudden movements in the final 11 trading days left this year if the outlook for Christmas and new year sales changes.

So far most analysts believe that this year will be a decent, if not spectacular, trading session but, if anything, there is the chance of stronger-than- expected performances.

However much of the corporate activity, particularly deals led by private equity firms, took place in the mid-cap sector, which outpaced the FTSE 100.

One major casualty was "big pharma". GlaxoSmithKline was languishing at second from the bottom of the table with an 8.5 per cent fall while AstraZeneca was 86th with a 1 per cent rise.

Some of the biggest losers were companies that had "personal" problems. The biggest faller was Carnival, the cruise line company, which dropped almost 25 per cent. It was suffered several broadside shots.

Hurricane Katrina last year made travellers nervous about booking a seaborne passage off the US East Coast and it lost business to rival companies that had brought new ships into service; that also had the impact of increasing capacity and decreasing yields. Higher fuel prices and rising interest rates on both side of the Atlantic affected the short cruise end of the market in particular.

Cadbury Schweppes, another faller, with a 2.7 per cent loss, was hit by a salmonella outbreak at one of its factories that forced it to withdraw a million chocolate bars from Britain's shop shelves.

Investors in ITV, which has fallen 3 per cent this year and is hovering above the £1 a share mark, must be rueing the rejection of a 130p takeover offer by Greg Dyke, the former director general of the BBC, who teamed up with Apax and Goldman Sachs.

At the other end of the table British Airways benefited from talk of consolidation and a strong rebound in air travel, despite the August bomb scares in the UK, to end up eighth with a 57 per cent rise.