Market Report: Fed shock puts the shine back on gold

 

City traders are fickle types, and yesterday the only thing they appeared interested in was stocks that dig up yellow metal. The markets surged after the shock news that the US Federal Reserve will not reduce its current asset purchasing programme – much to the surprise of many who had predicted a tapering of quantitative easing. As the markets took it on board, the dollar weakened and gold, in turn, jumped.

Randgold Resources was top of the tree and surged 363p to 4,841p while Mexican precious metal miner Fresnillo was 61p better at 1,069p.

Over on the mid-tier index, Andrew Wray could have been forgiven for thinking he was the most popular guy in the City. Miner African Barrick Gold soared 15.4 per cent to the top of the table when his promotion to finance chief was announced. But although analysts described him as "well-regarded", the rocketing share price was due to African Barrick's highly leveraged position to the price of gold.

Investec's metal experts said: "We expect African Barrick to benefit the most, given it is most leveraged to the gold price and was down 27 per cent since our last note."

Mr Wray's appointment is part of new chief executive Bradley Gordon's plan to overhaul management after a series of departures. African Barrick was 20.9p brighter at 156.7p.

The overall market sparkled after the Fed's comments and the FTSE 100 index jumped more than 1.5 per cent in morning trade before settling back to close up 66.57 points to 6,625.39.

Traders managed to tear themselves away from miners for a minute to look at oil explorer Tullow Oil as expectations it will find oil in Madagascar helped it jet 37p to 1,080p.

Tesco looked decidedly dull as City scribblers took the red pen to it. The supermarket giant recently parted company with long-term brokers JPMorgan and Nomura, and yesterday Nomura downgraded it from buy to neutral. Traders noted that Tesco ditched Morgan and Nomura after seven years, just after the analysts first cut their forecasts.

As part of its European supermarket review, Nomura cut its price target to 400p from 430p, and Tesco checked out 1p to 377.3p.

However, Nomura likes Morrisons. It rated the Bradford-based retailer a buy and said it expects "operational upside" and a boost from its freehold properties. Morrisons added 1p to 292.5p

At the bottom of the blue-chips was telecoms group Vodafone. Citi's Simon Weeden retained his buy call and said it had a "core attraction", but it lost 1.6p to 209.75p. Some thought the fall was due to some of its management selling some shares earlier this week, others blamed hedge funds that were shorting the company in light of its US joint venture and the fall in the US dollar.

Back to the mid-cap index, where Peel Hunt's foodies took a trip to Dairy Crest's cheese operations. They liked what they saw. They increased their target to 600p and rated it a buy to "reflect the opportunity in whey". But the group declined 0.8p to 480.9p.

On Aim, online fashion group Asos reported sales up 47 per cent to £208m and strutted up 636p to 5,469p. Gulf Keystone Petroleum reported that in the six months to July its Kurdistan field had produced 183,000 barrels of oil, of which 179,063 barrels were sold into the domestic market. The good news was countered by some analysts who highlighted issues it may have with funding of future projects. It was 17.75p weaker at 200p. Westhouse's Jamal Orazbayeva maintained the sell rating for the stock and said he is concerned "with cash costs, interest payments and the net debt position".

Positive signs at Finland-focused Karelian Diamond Resources' Riihivaara exploration site helped it sparkle up 0.05p to 0.9p. The rush to gold stocks didn't leave out Aim's miners and Central Rand Gold, added 5.25p to 28.13p while Tanzanian Shanta Gold reported good drill results and ticked up 0.875p to 14.6p.

Africa-focused agriculture group Agriterra said it had expanded its cocoa plantation and trading operations in Sierra Leone and it was up 0.085p to 2.355p. Regional department store group Beales was 0.5p weaker to 11p after reporting comparable sales, for the 19 weeks to mid-September, were down 10.5 per cent compared with the same period last year.

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