Market Report: Antofagasta on a high note in copper crescendo
Friday 12 November 2010
As the price of copper reached a record high yesterday, Antofagasta was propelled towards the top of the blue-chip index even as analysts disagreed over what the future holds for both the miner and the metal.
The Chilean copper miner enjoyed a surge of 67p to 1,472p after Bank of America Merrill Lynch bumped up its recommendation by two ratings – from "underperform" to "buy" – and predicted a rise in commodities, describing copper as a "key winner".
"Copper is one of our top picks of the metals, and we see Antofagasta as the default blue-chip name to play this theme," the broker said. Although it warned of potential short-term volatility, it said that it had a "positive global demand view for the years ahead, particularly for emerging markets".
Yet not everyone was in agreement. One rather more bearish voice was Evolution Securities' Charles Kernot, who described Antofagasta as "overpriced". He added: "As far as copper is concerned, I think that it, along with a lot of other commodities, are moving up as a consequence of the situation with quantitative easing... When that financial influence unwinds, then there is scope for the price to come back."
In the remainder of its note, in which Bank of America Merrill Lynch outlined its "very bullish outlook" on the European mining and metals sector, the broker upgraded a further five miners to "buy", all of which made decent gains. They were helped by positive industrial output data from China, and the biggest rise was seen by Ferrexpo, which finished at 395.9p, 38.5p ahead.
However, even as the miners attempted to drive it up, the FTSE 100 just failed to keep its head above water and it edged down 1.71 points to 5,815.23. At the top of the index was BT, as its second-quarter results saw it increase its core earnings forecast for the year, and its price rose 9.7p to 169.1p.
Ireland's continuing financial troubles hit Royal Bank of Scotland, with investors deserting the bank over its exposure to the country, according to traders. RBS's Irish unit, Ulster Bank, has nearly £800m of impairments and earlier this month it revealed that it had lost £176m in the third quarter. Still, despite dipping at one point in the morning to as low as 39.91p, RBS later stabilised – thanks in part to the European Commission clarifying that Ireland had not asked for help – and ended up 1.14p weaker on 41.02p.
A downgrade by Credit Suisse left Icap struggling, as it shed 20.4p to 473.6p. The broker moved its advice to "neutral" from "outperform", and said that it expects "limited further share price appreciation in the near term" from the company, which has enjoyed a strong, albeit rather volatile, rise in the last three months.
Another straggler was British Airways, whose dispute with its cabin crew looked set to continue following the suspension of a ballot on the airline's offer, and it dipped 8.6p to 264.2p. Keeping it company was Barclays, with traders giving profit-taking and a general malaise in the market towards the banks as reasons for a 4.7p fall to 284.9p.
Market gossips returned to a couple of old favourites on the FTSE 250, with the first being around a potential bid for SIG from the Canadian company IKO Group, which already owns about 10 per cent of the insulation and roofing company. Traders were unconvinced, with one dismissing it as "an old rumour that's resurfaced", yet it closed up 4.9p at 118p. There was similar scepticism over gossip of Rentokil Initial being targeted, as it climbed 3.7p to 94.25p
Top of the mid-tier index was Supergroup, which gained 150p to 1,350p as Goldman Sachs placed the company – whose brands include Superdry – on its buy list. At the other end, the Yellow Pages-publisher Yell continued to drop. Canaccord Genuity downgraded it to "sell" from "hold", and it lost 1.26p to 10.9p.
Among the small-caps, Hill & Smith endured a tough day as it retreated 49.25p to 238p. The catalyst was a profit warning from the highways infrastructure company, which blamed a reduction in Government spending for it having to downgrade its pre-tax profit forecasts for the year.
Suffering alongside it, also thanks to a profit warning, was the retailer JJB Sports. The company noted that its gross margin had been "significantly affected by promotional activity", and revealed sales growth figures that were below expectations.
Commenting on its interim management statement, Charles Stanley said that it "confirms our investment thesis... that the turnaround would be highly protracted and uncertain. At present, the company is being run for cash and to reduce inappropriate product ranges/excess inventory". JJB Sports finished 1.6p worse off, at 7.95p.
On the AIM, African Minerals managed to raise more than $300m through placing 45 million shares at 425p a pop. The cash is to be used by the mineral exploration company to develop a project in Sierra Leone, with production expected to commence towards the end of 2011. It slipped 1.75p to 423.25p.
ftse 100 risers
FTSE 250 RISERS
ftse 100 fallers
FTSE 250 fallers
MLloyds Banking Group 68.59p (up 1p, 1.48 per cent) The loss of its chief risk officer, Carol Sergeant, fails to prevent Lloyds making gains.
MBurberry 1,007p (up 8p, 0.8 per cent) Up as Nomura keeps the clothing brand on a "neutral" recommendation before first-half results next week.
MNext 2,128p (up 10p, 0.47 per cent) Slight gain for retailer after its peer New Look warns of market conditions getting tougher.
MGartmore 115.5p (up 5.3p, 4.81 per cent) Fund manager still recovering after big fall earlier in the week following Roger Guy's departure.
MSalamander Energy 228.6p (up 8.2p, 3.72 per cent) Announced a $11.2m deal to buy Indonesian gas firm Elnusa Bangkanai Energy.
MGreene King 440p (up 3.4p, 0.78 per cent) Pub group banks a small rise as Credit Suisse raises its price target to 462p from 422p.
n3i 316.1p (down 8.8p, 2.71 per cent) Saw the value of its portfolio and aggregate earnings rise, yet could not prevent a fall in its share price.
nMarks & Spencer 391.2p (down 4.4p, 1.11 per cent) Removed from Goldman Sach's conviction buy list, and Panmure reduces its price target.
nVedanta Resources 2,314p (down 25p, 1.07 per cent) Mining group's first-half results reveal its profits failed to match expectations.
nTullett Prebon 369p (down 28.4p, 7.15 per cent) Fears over today's trading update, and a broker downgrade to rival Icap, prompts falls.
nCookson 530.5p (down 32.5p, 5.77 per cent) Market disappointed by industrial materials group's failure to raise its full-year trading forecast.
nBBA Aviation 198.3p (down 8p, 3.88 per cent) Positive interim management statement, released yesterday, is not enough to excite investors.
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