Market Report: BG claims Footsie crown on Repsol's Chinese deal

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BG rallied to pole position on the FTSE 100 last night, with traders buying in on the read-across from Repsol's joint venture with China's Sinopec.

The deal, which will see Repsol join hands with Sinopec to exploit lucrative oil deposits in offshore Brazil, triggered interest in BG as traders highlighted the implications for the London-listed group's activities in Latin America. The alliance will lead to the creation of one of the continent's largest energy groups, valued at more than $17bn (£11bn). That in turn, it was said, could boost valuations of BG's interests in the region, as investors and analysts revisit the numbers in the coming days.

Additional support came from the oil price, which rose above the $81 per barrel mark to touch a seven-week high at one point. Prices were driven by a combination of weakness in the US dollar and stronger-than-expected Chinese manufacturing data, lifting oil-related share prices.

BG led the way, gaining 4.6 per cent or 51.5p to 1,170p, while BP, which yesterday said the cost of the response to the Gulf of Mexico disaster had swelled to $11.2bn, rose 12.7p to 440.5p. The latter continued to draw steam from hopes of an earlier-than-expected resumption of dividends.

Overall, the markets ended the week on a positive note, with the FTSE 100 gaining 44.28 points to 5,592.9 and the mid-cap FTSE 250 index gaining 60.67 points to 10,592.47. Besides the push from oil stocks, the benchmark benefited from a strong mining sector. Like the oil price, metals prices gained ground from the strength of the Chinese manufacturing activity, driving interest in the likes of Lonmin, up 47p at 1,716p, and Xstrata, up 23.5p at 1,241.5p. Vedanta Resources was also higher, adding 44p to 2,209p after India's Supreme Court stayed a lower court's order closing the Tuticorin copper smelter run by Vedanta subsidiary Sterlite Industries.

In the wider sector, the silver miner Fresnillo was 28p better off at 1,270p, partly owing to continued strength in precious metals prices and partly thanks to a push from JP Morgan Cazenove. The broker abandoned its negative stance, moving the stock to "neutral" from "underweight" as it factored in higher gold and silver price assumptions. African Barrick Gold, whose target price was revised to 900p from 775p by the broker, was also higher, adding 9.5p to 599.5p.

"After stalling briefly in July, gold and silver prices have continued their upward march in recent months, as doubts over the strength of the economic recovery persist against a backdrop of loose monetary policy," JP Morgan said, adding: "Gold has also continued to enjoy a perceived safe haven status as an alternative to holding currency. This perception is enhanced by the fact that central banks have become net buyers globally as European central bank gold sales have stopped after 10 years."

Elsewhere, the oil services and engineering group Amec was 24p stronger at 1,010p after Credit Suisse highlighted the prospect of higher growth as capital expenditure in Canadian oil sands, mining and nuclear markets gathers pace. "We think this theme of defensive, reasonably priced growth driven by a recovery in energy spend is compelling in the context of an uncertain outlook for the general economy going into 2011," the broker said, initiating coverage with an "outperform" stance and a 1,180p target price.

Among insurers, Prudential gained 10.5p to 647p amid reports that it was looking to appoint former FSA chief Sir Howard Davis to its board. A more credible reason for the share price rise was some positive feedback from a recent management outing in the City. Prudential's finance director was at Panmure Gordon earlier this week, and yesterday the broker weighed in on the potential for share price gains as the market takes a second look at the insurer's Asian operations.

"AIA's imminent IPO will highlight the £4bn (or 160p per share) of latent value within Pru's Asian operations not currently reflected in the share price," Panmure said, repeating its "buy" recommendation and 781p target price. "This is despite the ... share price rally since early July."

HSBC was the strongest of the banks, rising 8.6p to 653.6p after Goldman Sachs added the stock to its widely followed "conviction buy" list. The broker said the speed and extent of HSBC's shift towards fast-growing emerging markets was understated by its consolidated balance sheet, "which excludes the group's emerging market exposures though associates". This points to higher returns and growth, Goldman explained, boosting sentiment around the stock.

In the wider sector, Lloyds was down 0.6p at 73.5p, while the Royal Bank of Scotland rose 0.46p to 47.67p. Standard Chartered and Barclays edged up 9p to 1,835p and 0.15p to 299.75p respectively.

CSR fell 14.6p to 344.4p, while its sector peer Wolfson Microelectronics lost 7.5p to 261.5p after Seymour Pierce moved the former to "outperform" from "buy" and the latter to "sell" from "hold". The broker was sceptical about recent rumours of contract wins related to Apple's next generation of iPhone and iPad devices, triggering profit-taking in the two chip makers.

FTSE 100 Risers

Randgold Resources 6,525p (up 155p, 2.4 per cent)

Gold prices continue to strengthen, striking new record above $1,320 per ounce.

BHP Billiton 2,058p (up 33p, 1.6 per cent)

Miners gain ground after better- than-expected Chinese manufacturing data boosts metals prices.

Marks & Spencer 391.6p (up 3.5p, 0.9 per cent)

Continues to build on optimism ahead of its second-quarter update next week.

FTSE 100 Fallers

Man 216.2p (down 2.9p, 1.3 per cent)

Falls back amid profit-taking after securing first place on the FTSE 100 on Thursday.

Burberry 1,030p (down 10p, 1 per cent)

Bid rumours fade; Société Générale switches its stance to "hold" from "buy".

J Sainsbury 389p (down 1.7p, 0.4 per cent)

Eases ahead of its second-quarter trading statement, which is due next week.

FTSE 250 Risers

Wellstream 773.5p (up 8.5p, 1.1 per cent)

Trades higher as the market awaits further news on the recently disclosed bid approaches.

Micro Focus International 384p (up 2.5p, 0.7 per cent)

Panmure Gordon revises its target price to 465p from 461p.

Tate & Lyle 469.3p (up 2.5p, 0.5 per cent)

UBS lowers its target price to 490p from 500, but sticks with its "neutral" stance.

FTSE 250 Fallers

Barratt Developments 97.2p (down 1.55p, 1.6 per cent)

Eases with parts of the wider housing sector, which slips amid worries about UK growth.

Hochschild Mining 438.3p (down 6.7p, 1.5 per cent)

JP Morgan Cazenove switches its stance to "neutral" from "overweight".

Senior 137.4p (down 1.5p, 1.1 per cent)

Retreats as traders move to bank profits following Thursday's strong gains.