Market Report: Gold miners shine out in a sea of red
Tuesday 26 February 2013
Amid turmoil on the equity markets, gold miners were seen to be nearly as safe as the gold they dig up. There was a sea of red across traders' screens as the market was spooked by the Italian government election deadlock but the gold price ticked up, and gold miners Randgold Resources and Centamin glistened as the second-best risers in the benchmark and mid-cap index respectively.
The eurozone crisis appeared to have been reignited and punters piled in to safe havens. Gold futures went past the $1,600-an-ounce mark. All this comes only a week after investors started selling out of gold into equities. But the City has a short memory and herd-like behaviour. The FTSE 100 index fell more than 1.3 per cent – down 84.93 points to 6270.44.
Randgold, up 140p to 5,615p, was in favour, with investors looking to take advantage of a recent low point for the stock. Since the beginning of February, Randgold's share price was down more than 10 per cent, and one trader said now is the time that savvy investors are piling back in as they see it as a "buying opportunity".
The same could be said for mid-tier Egyptian gold miner Centamin, up 1.4p to 55.3p after having lost more than 14 per cent since the start of the month.
While gold miners were popular, financial stocks were not.
Moody's downgraded the UK government-guaranteed debt of Barclays and Lloyds Banking Group. The problems in Italy and the feared instability also gave rise to concerns of debt crisis "contagion risk" for banks.
Barclays was the biggest faller, down 14.65p to 297p, while Lloyds declined 1.79p to 53.14p.
Joining the fallers was Vodafone. Akhil Dattani at JP Morgan Cazenove reckons the telecoms group has alternatives to expensive M&A deals across Europe. Vodafone has been rumoured to be eyeing Kabel Deutschland but JP Morgan's telecoms experts think a regional strategy for growth – not M&A – would still allow for a stable dividend. JP Morgan gave the stock a 220p price target but the shares slipped 2.2p to 161.9p.
Analysts at Jefferies liked the look of broker Hargreaves Lansdown and rated it a buy with a 1,000p price target, but the shares edged down 9.5p to 836.5p.
In a blue-chip index with very few risers, speciality chemicals maker Croda International stood out, up 28p to 2,584p after it reported a 6.6 per cent rise in full-year profits.
Over on the mid-cap index, profits at chemicals group Elementis were up 5 per cent but the really good news for shareholders was the special dividend that it announced it will pay, and the shares took the top spot on the mid-tier index, up 13.9p to 241.6p.
Shares in Sports Direct tumbled when it emerged that founder Mike Ashley had sold £100m worth of them. The sell-off frightened some, after a good set of results recently, and the shares were 21.5p worse off at 409p.
Investors in AIM-listed Rare Earths Global ran for cover after the mining services group issued a profit warning. The group revealed that it has been hit by China's strict rules on exporting, and the shares got buried at the bottom of the table, down 45p to 210p.
Rare earths – a group of 17 chemically similar elements – have been in demand as their use in alternative energy (such as wind turbines and hybrid car batteries) has rocketed. But China has been stepping up export restrictions on rare earths.
Can it get any worse for shareholders in troubled Pursuit Dynamics? Probably not. The shares lost more than 95 per cent during 2012 but they fell 44 per cent – down 1.3p to 1.6p. In a strategic review, the tech firm said it will take steps to "reduce its cost base, including giving notice to all employees". It is also planning to sell or license its intellectual property to "achieve the best available outcome for shareholders". The fluid technology group has at least made one person richer – Simon Cawkwell, known as Evil Knievil, previously shorted the stock.
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