Market Report: Chinese recovery helps miners dig in
Wednesday 06 November 2013
Signs of a recovering services economy in China and better iron ore prices pushed mining stocks toward the top of the blue chip table yesterday, but even this wasn't enough to dig the Footsie out of a hole. HSBC's Chinese services data suggested the Chinese economy performed well in October while iron ore prices also helped the mood.
Miners added 8.5 points to the benchmark index but it failed to return to positive territory and ended the day down 16.78 points at 6,746.84.
The best performing digger of the day was Chilean miner Antofagasta, up 25.5p to 889p, after reports it is close to securing $650m finance for a copper project.
Anglo American collected 41.5p to 1,536p and Rio Tinto was 41p better at 3,330.5p.
Over on the mid-tier table, Polymetal International was the best performer, and added 24p to 595.5p.
Also surging ahead on the Footsie was drugs group Shire which gobbled up 38p to 2,858p after it revealed its binge eating disorder treatment has passed clinical trials.
While the mining and pharmaceutical sectors were practically the only areas making gains yesterday, the banking sector was a real drag on the index.
State-owned Royal Bank of Scotland continued to disappoint. Last week it revealed it will not split itself into separate good and bad banks and will instead create an internal "bad bank" which will ring-fence £38bn of poor loans and assets. The shares tumbled at the time but JP Morgan Cazenove's banking analysts have run the numbers and said the bank is still expensive. The internal bad bank and the planned sell-off of its US bank Citizens is "positive" for debtholders but comes at a "significant cost to shareholders" JP's experts assert.
They have slashed their target price to 320p and said they prefer Barclays which is "40 per cent cheaper" and has no litigation risk like RBS.
The 81 per cent state-owned bank lost 5.7p to 326p while Barclays edged back 6.15p to 249p and Lloyds Banking Group declined 1.88p to 75.16p.
Marks & Spencer reported its ninth consecutive quarterly fall in clothing sales but food sales outperformed and it was 21.9p better at 508.25p – top of the blue chip index.
Back on the mid-caps, construction group Balfour Beatty said its regional businesses had begun to improve but its major projects division was suffering and it crumbled 6.3p to 278p.
The Lakeside shopping centre owner Intu Properties' chief executive David Fischel said the group was "encouraged by the continuing signs of improvement in the UK consumer environment" at its trading update and said it may seek partners to help fund its £1bn development pipeline. But it was 10.4p worse off at 335.4p.
Flybe's non-executive chairman Jim French has stood down after 20 years at the company and Simon Laffin, chairman of Assura, has taken over the role. Mr French helped turn the small airline group into a bigger player. He handed over the controls in the summer but stayed on as non-executive chairman to ensure a smooth transition. The company wanted Mr Laffin to be in his seat ahead of its half-year results next week and Flybe ticked up 1.625p to 67p.
Aer Lingus, which is jointly listed in Dublin and London, released a strong third-quarter update and flew up 0.07 to €1.376.
The AIM-listed miner and Fabergé owner Gemfields was 2.25p brighter at 35p after a solid update when it said two recent auctions achieved record carat prices.
Telecoms tiddler Coms has bought Redstone's trading business for £9.5m. Redstone's clients include Cisco, IBM and HP and Coms added 0.025p to 3.52p.
Marketing and brand specialist LiteBulb has bought Meld and intends to raise up to £3m via a share placing. Current investors – the property entrepreneur Nigel Wray and Betfair founder Andrew Black – have bought more shares in the placing. LiteBulb dimmed 0.06p to 0.765p. Technology and radiation detection company Kromek has won new contracts and the shares uncovered a 3.5p gain to 63p.
Firestone Diamonds was bullish after a feasibility study after a review by its new chief Stuart Brown, who joined from De Beers. It was unmoved at 3.87p.
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