Market Report: Lonmin misses out as the comeback continues

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At the end of what has been another dramatic week on the markets, traders were heading home in a fairly good mood last night as the top-tier index managed a second consecutive day ahead.

However, Lonmin was left towards the back of the pack after cold water was poured on speculation the miner could become a takeover target.

Xstrata abandoned a 3,300p a share approach for the platinum producer back in 2008, blaming the credit crisis for its decision, and – with Lonmin's share price having dropped by over 45 per cent since then – talk has persisted that another bid could be around the corner.

Yet UBS was not convinced, saying that although "investors are wary of being too short Lonmin... on the potential for Xstrata to make an opportunistic takeover bid", there was little chance of a renewed approach.

Reiterating his "sell" recommendation, the broker's analyst Ben Davis said that Xstrata – which rose 18.5p to 1,071p – was unlikely to be interested "given that Lonmin's valuation remains 45 per cent more expensive than [its] previous bid". He went on to add that platinum would not be as attractive to the Anglo-Swiss miner as its own "organic growth into copper and thermal coal".

With Mr Davis saying the platinum sector faces "numerous operating and political risks", Lonmin only managed to ease forwards 13p to 1,166p, and it received another blow from Exane BNP Paribas, which cut its advice on the group to "underperform".

Many of the other miners, however, were storming up after Morgan Stanley said the sector looked "better positioned to weather a potential downturn [than last time] given most have shored up their balance sheets and expanded their production bases".

Examining the "bear case" for next year, the broker recommended Antofagasta – which was up 41p to 1,259 – and Rio Tinto – 157p ahead at 3,688.5p – as good options "in an environment of heightened volatility". In the case of global economic growth staying on track, it picked Ferrexpo and Kazakhmys, and they closed 17.7p higher at 368.9p and 60.5p higher at 1,015p respectively.

The bargain hunters were hardly being picky yesterday, however, as all but one blue-chip stock, the miner Randgold, finished in the black. The FTSE 100 managed to shrug off disappointing consumer confidence data from the US to advance 157.2 points to 5,320.03, leaving it 73.04 points stronger that at the start of what had been a dramatic week. As a result, City voices were starting to show cautious optimism that the worst of a slump that saw them lose over 900 points in 11 sessions could be behind them.

The banks enjoyed a strong day after Italy, Belgium, Spain and France decided to ban short-selling of financial stocks, with Barclays pushed up 9.35p to 187.2p as Collins Stewart's Matthew Czepliewicz kept his "buy" rating, saying its share price was "heavily oversold".

Meanwhile, Royal Bank of Scotland ticked up 1.22p to 26.49p with analysts from Citigroup saying its recent interim figures showed that "although the economic outlook remains uncertain, the company does appear to be gradually turning the corner in terms of operating performance."

Sentiment in the City around Ocado has not been optimistic of late, and yesterday it plummeted 5.36 per cent, or 7.1p, to 125.4p on the FTSE 250, leaving the group over 50 per cent lower than its peak in June and 25 per cent under its float price of 180p. The online grocer – which earlier in the week was hit when Goldman Sachs, one of thebrokers involved in last year's IPO, cut its forecasts – fell after Panmure Gordon's Philip Dorgan reiterated his "sell" recommendation.

"Forecasts have tumbled fast and are continuing to fall... and yet we have had no statement from the company, which we find a little puzzling," said the analyst, who added that "with each downgrade, the potential for the need to raise funds in the future increases."

Sports Direct was lifted 5.5p to 211.4p by the Office of Fair Trading's declaration that it had provisionally dropped its investigation into alleged anti-competitive conduct among the sporting goods retailers. Seymour Pierce upgraded its rating to "buy" from "hold", while its peer JJB Sports also ticked up, putting on 3.25p to 22.5p on the Alternative Investment Market.

Elsewhere, Premier Oil climbed 9.7p to 360.3p despite the energy explorer disappointing investors with the news that it was abandoning a well off the shore of Indonesia.

Down on the small-cap index, Trinity Mirror – which had fallen over 50 per cent since March – jumped up 6.75p, or 17.65 per cent, to 45p, even though the publisher announced a fall in its first-half pretax profits of 65 per cent. The drop did not come as a surprise,however, and there was some encouragement to take from the publisher's statement that its Sunday newspapers were witnessing a major fillip from the closure of the News of the World.

FTSE 100 Risers

Inmarsat 441p (up 39.1p, 9.73 per cent)

Satellite operator continues to rise in the wake of Citi giving it a "buy" rating earlier in the week.

Essar Energy 300.7p (up 17.8p, 6.29 per cent)

Arden Partners initiates coverage on the oil group with a "buy" recommendation.

Wolseley 1,611p (up 74p, 4.81 per cent)

Building supplies company helped by Evolution raising its advice to "buy" from "neutral".

FTSE 100 Fallers

Randgold Resources 6,170p (down 15p, 0.24 per cent)

Precious-metals miner the only faller as investors flee defensive stocks.

Wm Morrison 280.2p (up 1.2p, 0.43 per cent)

Supermarket one of worst performers after reports it is closer to possible approach for Iceland.

ARM Holdings 526p (up 6p, 1.15 per cent)

Chip designer underperforms with Bank of America Merrill Lynch changing its advice to "underperform".

FTSE 250 Risers

EnQuest 114.7p (up 6.7p, 6.2 per cent)

Oil group spurts forwards as it reveals 145 per cent increase in its first-half profits.

Home Retail 141.4p (up 7.4p, 5.52 per cent)

Owner of Argos climbs despite HSBC reducing its price target to 130p from 140p.

Henderson 140.5p (up 6.4p, 4.77 per cent)

Fund manager advances ahead of the release of its interim results next Wednesday.

FTSE 250 Fallers

Gem Diamonds 182.4p (down 4.6p, 2.46 per cent)

Diamond producer’s latest drop means it has lost more than 25 per cent over the past 13 sessions.

African Barrick Gold 527p (down 13p, 2.41 per cent)

Miner hit by the price of gold continuing to move lower from its recent peak.

JD Sports Fashion 880p (down 16.5p, 1.84 per cent)

Retailer edges back after enjoying a strong rise on Thursday.

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