Market Report: Improving news digs miners out of trouble
Wednesday 10 July 2013
Miners managed to dig themselves out yesterday after weeks of being in the red as the US bellwether Alcoa reported better than expected results. The aluminium producer is the first to report earnings in the US each quarter, and beat expectations this time around. This, combined with better economic news across the board, a rise in metal prices and news of falling Chinese production costs sent metal miners soaring.
The iron ore miner Vedanta Resources was top of the leaderboard – up 86p, or 8.5 per cent, to 1,094p. Fellow iron ore specialist Ferrexpo, on the mid-tier index, reported a 21 per cent rise in output during the second quarter. Deutsche Bank's analysts were so keen they rated it a buy with a target price of 360p for shares that were 16.9p ahead at 155.6p.
The mining giant Anglo American was in focus after analysts at Macquarie Bank ran the numbers on a potential break-up of the group. Macquarie thinks that if Anglo sold off its 80 per cent stake in Anglo American Platinum and its De Beers diamond business and brought in a partner at its troubled Minas-Rio mining project it would add more value for its long-suffering shareholders.
Macquarie's experts think new chief executive Mark Cutifani "has his work cut out for him to 'pay back' Anglo shareholders for the last five to six years of value destruction".
Separately, its De Beers subsidiary – the world's largest diamond producer – averted strike action in South Africa this week when it agreed to increase pay by 9 per cent. Anglo added 37p to 1,281p.
The FTSE 100 continued the previous day's gains. It soared another 63.01 points to 6,513.08, back up to levels seen in early June. Tobi Morris, a senior sales trader at the spread-betting group CMC Markets, said: "Weaker than expected industrial production numbers out of the UK yesterday failed to take the shine off stocks, with the FTSE securing further gains."
A consistent riser was Royal Bank of Scotland after a strong performance on Monday, when it finished the day up 4.3 per cent. Yesterday it added another 15.6p to 304.4p as news that a "good" and "bad" bank split is looking less likely helped it to continue the run. Goldman Sachs ran the numbers factoring in if it did have to split and raised its rating to "buy" from "neutral" with a 370p price target. It argued that if the Government did proceed with a split of the tax-payer-owned bank it would at the very least cure the problems of "muted core returns and elevated uncertainty".
The high-street bellwether Marks & Spencer reported yet another fall in clothing sales and lost 6.5p to 453.2p. On the mid-cap index, a positive update from the engineering data and design IT systems specialist Aveva helped it to charge ahead 310p to 2,578p.
The gold producer Centamin produced another record quarter, with 93,624 ounces of gold produced, but it slipped 1.6p to 36.76p.
A new home needs a new floor, so the City was betting that a tiles and flooring specialist will benefit from the latest housing boom. The retailer Topps Tiles was chosen as a top pick by Goldman Sachs's analysts because, they said, an "increase in housing turnover" will mean people will spend more on tarting up their homes. They said the 320-strong chain has strengthened its position in the "floor covering niche", and added that the risk from "online disruption" is low because people still want to buy floor coverings and tiles from shops, not over the internet. The small-cap retailer laid down a 5.25p gain to 77.5p.
The Aim-listed crowd-sourcing specialist blur Group reported its most successful quarter, with a 125 per cent increase in the number of new projects and a 315 per cent increase in the total value of the projects added at $9.41m (£6.33m). It produced a 40p rise to 242.5p.
In London's biggest technology float this year Keyword Studios, a technical services provider to the video games industry, plans to raise £28m on Aim.
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