Anglo American fell behind in a buoyant market last night, with investors pushing the FTSE 100 further above the 4,000-point mark.
The miner eased 33p or 2.3 per cent to 1,379p as analysts studied the consequences of the company's convertible bond placing.
Anglo issued and placed a $1.5bn (£1bn) convertible bond with a 4 per cent coupon earlier this week, setting the stage for some selling pressure as recipients of the issue hedge their bets.
"As the recipients of the convertible bonds hedge their equity exposure by selling the shares, we believe that there could be weakness in the stock price in the near term due to the technical selling pressure on the shares," Arbuthnot Securities said.
"In aggregate, the number of shares created due to the bond is [around] 55 million. Assuming 75 per cent of typical holders of convertible bonds, such as convertible bond funds/arbitrage funds, sell shares to hedge their equity exposure, we expect the net selling pressure on the stock to be [around] 30 million shares," Arbuthnot added.
This compares with a historical daily volume of about 8 million shares, opening up a buying opportunity in the sessions ahead, the broker said.
Overall, the FTSE 100 was 39.8 points higher at 4,092.8, while the FTSE 250 gained 1.2 per cent or 83 points to 7,307.7. The market supplemented earlier gains following better than expected results from Citigroup, which announced its first profit in six quarters.
The American banking giant recorded a net profit of $1.6bn in the last quarter, compared with a $5.1bn loss this time last year, lifting spirits on both sides of the Atlantic.
The news emboldened traders, who continued to buy into the banking sector. Lloyds Banking Group, up 16.6 per cent or 14.9p at 104.6p, was the strongest, shrugging off a new circular from Exane BNP Paribas, which switched its stance to "underperform" from "neutral". Royal Bank of Scotland was just behind, advancing to 32.7p, up 14.3 per cent or 4.1p.
As in the previous session, similar factors drove the insurance issues, with Aviva rising to 286.25p, up 12.3 per cent or 31.2p, and Standard Life firming up by 5.1 per cent or 9.6p to 199p.
Parts of the commercial property sector remained unsettled, this time thanks to UBS, which issued a series of downgrades.
Hammerson, which was moved to "neutral" from "buy", fell to 299.75p, down 1.75p, while Land Securities, which was also moved to "neutral", touched a low of 458p, down 19p, before drawing strength from the upturn in the wider market to close at 539p, down 1p.
On the former, UBS said the group's asset recycling model meant its initial cash flow was relatively low, constraining the share price until the outcome of the expected sales or lettings at Bishops Square in London and Les Trio Quartiers in Paris were known.
On Land Securities, the broker said that while the business has a number of long-term attractions, including healthy yields on earnings and dividends, the recent strength in the company's share price weighed against the buy case.
Tesco was broadly unchanged, easing slightly to 329.9p, down 0.1p, as investors took profits ahead of the supermarket group's full-year results, which are due next week. The company is forecast to post revenues of about £54bn, or just over £1bn per week. Merrill Lynch, which yesterday upgraded the stock to "buy", said that while the company was showing signs of maturity in the UK, it remained a powerful growth vehicle.
"With group returns 'stable to building' and net debt modestly reducing this is not a cocktail that is reflected in the current share-price," the broker said. "The results next week will not provide all the answers, but we believe they should offer some reassurance that Tesco remains well-run and highly profitable."
Further afield, companies connected to the car industry, such as the car dealership operators Inchcape, down 4.6 per cent or 0.75p at 15.75p, and Lookers, down 9.1 per cent or 4.25p at 42.25p, retreated as investors took profits from the recent sector-wide rally, which was inspired by hopes for incentives to stimulate industry demand in the upcoming Budget announcement.
Panmure Gordon said a scrappage incentive scheme which, in return for a nine-year-old car, supplies a subsidy of £2,000 per vehicle if a new car is purchased, "would clearly improve the prospects at the volume end of the market, which should benefit all of the players in the industry".
"With an estimated 4.5 million cars currently over nine years old in the UK at present, a small take-up of this incentive could prove significant in the context of 1.6 million new vehicle registrations anticipated in 2009," the broker said.
On the upside, the engineering group Charter International gained 7.5 per cent or 38p to 546p after KBC Peel Hunt switched its stance on the stock to "buy" from "hold".
Wood Group was 3.4 per cent or 8.5p higher at 260.25p thanks to analysts at UBS, which chose the energy services company as one of its top picks in the European oil services sector.Reuse content