Market Report: Lonmin in spotlight after Xstrata-Vale talks end

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The end of the Xstrata-Vale saga drew much attention yesterday, sparking speculation about Vale's next move and, notably, refocusing minds on the Anglo-Swiss miner's predatory streak.

"It's entirely plausible to think that they may return to their roots," said one market source, adding: "They are good at doing deals, at looking for targets and snapping up businesses."

Xstrata has completed a string of major acquisitions with a combined worth of more than $33bn (£16.4bn) since making its market debut in March 2002. So, if the miner does revert to form and goes hunting, where is it likely to cast its net?

According to analysts at FinnCap, Xstrata may go for the South Africa-based Lonmin, the world's third-largest primary platinum producer. Xstrata has expressed a desire to grow its platinum division in the past and, with more than 80 per cent of global platinum production coming from South Africa, it would be the "logical place to acquire producing assets," FinnCap's analysts believe.

The talk lifted Lonmin to fifth place on the FTSE 100 leader board, up 76p to 3,101p. Xstrata, on the other hand, slumped to the bottom end of the London benchmark, at second place on the loser board, down 194p to 3,522p.

Vale's exit also focused attention on Anglo American, which has often been touted as a likely candidate for a merger with Xstrata. It rose by 103p to 2,945p yesterday, claiming fourth place on the leader board.

Other mining stocks were also strong, including Kazakhmys, which rose 64p to 1,606p after the market learnt that the government of Kazakhstan had approached it regarding a minority stake, Rio Tinto rose by 65p to 5,050p, while BHP Billiton gained 20p to 1,450p.

Overall, the FTSE 100 was down 28.7 points at 5,660.40. London was held back by weakness on Wall Street, which opened lower after news that US durable goods orders fell unexpectedly last month.

The figures from the US Commerce Department revealed a 1.7 per cent decline in new orders for manufactured durable goods, below market expectation of a 0.8 per cent rise. Shipments of manufactured durable goods, which have been down for three out of the last four months, also decreased, by 2.8 per cent.

Another US Commerce Department report, which showed that sales of new homes fell for the fourth month in February, also hurt sentiment, highlighting investors fears of a sharper than expected US economic slowdown.

The FTSE 250 was also down, shedding 38.5 points to 9,756.10. Elsewhere, some late afternoon speculation suggested that Diageo, the drinks giant behind the Guinness beer, Bailey's liqueur and the Smirnoff vodka brands, may be close to a tie-up with Anheuser-Busch, the leading US brewer behind the Budweiser branded beer.

The talk, which took Diageo's shares up by 20p to 1047p, was triggered by a report in Beer Business Daily, an American trade magazine, which said that many distributors were reporting that the company's US arm had recently postponed meetings, cancelled incentive trips and moved training appointments ahead of a meeting/conference call in April, sparking talk of an important announcement.

The rumour mill suggested the pair may be about to unveil an agreement that could see the US brewer distribute Guinness in the US. However, sources close to the company played down the speculation, and it is understood that no such deal between the two companies will be forthcoming.

On the FTSE 250, Aquarius Platinum topped the leader board, up 51p to 710.50p, after HSBC revised its target for the stock, to 710p from 680p.

Arriva on the other hand fell 23p to 661p. Analysts at Blue Oar initiated coverage on the stock, setting a "sell" rating on the bus operator's stock.

Food equipment group Enodis climbed by 7.50p to 151.50p following speculation regarding Manitowoc, the US construction equipment marker. Manitowoc has attempted to acquire Enodis in the past, and yesterday the chatter suggested that it was about to return with another offer the company.

On AIM, vague bid talk surrounded Christmas card and gift wrap maker International Greetings. The rumours were thin on the ground, bearing no clues about the level of the prospective offer, nor any indication about the identity of the suitor. Despite the lack of detail, the company's share price rose by 12 per cent or 2.25p to 21p.

The architectural group SMC was up almost 51 per cent or 3.375p to 10p after issuing an upbeat trading statement yesterday. The surge in the share price comes after some tough times last year, when SMC's acquisition strategy went awry. Since then, it has cut costs, installed a new chief executive and raised £15m to repay borrowings and reduce interest bills.

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