Market Report: Miners fired up to rescue ailing FTSE 100

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The Independent Online

Kazakhmys swung to pole position on the Footsie last night, leading a mining sector rally which saved the London market from ending a fourth consecutive sessions in the red.

The Kazakh miner's share price swelled by almost 20 per cent, or 46.2p, to close at 281.7p as investors bought in on expectations of new economic stimulus measures from the authorities in China. Chatter about the spending plans, which are pegged to be unveiled as early as today, sparked hopes of an uptick in industrial activity in the country, which in turn is expected to spur the demand for commodities.

The hopes provided a welcome change from three sessions of heavy losses in the sector, which had traded down with the wider market as the financial crisis showed signs of worsening. As investors moved into cap-italise on those losses and short sellers cashed in on downside bets, Antofagasta, the Chilean copper miner, advanced to 501.5p, up 19.4 per cent or 81.7p. Eurasian Natural Resources Corporation was just over 17 per cent, or 54.2p, stronger at 370p, while Xstrata gained 14.8 per cent, or 49.2p, to 382p. The latter got an extra shot in the arm from Goldman Sachs, which reiterated its "buy" stance on the stock.

Overall, the FTSE 100 was 133.8 points ahead at 3,645.9, while the FTSE 250, which had proved more resilient in recent sessions, climbed above the 6,000-point mark, gaining 232.7 points to 6,083.5.

Despite the strength, some market watchers remained cautious, warning that apart from a handful of brave bargain hunters, most investors still appeared to be nervous about the overall trend in equities. Official US payroll figures, which are due to be released at the end of this week, are expected to be a key catalyst for the market, they added.

Standard Chartered continued to lead in the banking sector, gaining 15 per cent, or 94.5p, to 724.5p as brokers issued upgrades in the light of recent results from the lender. UBS, which switched its stance to "buy" from "neutral", said the numbers provided a welcome change. "Record operating profits are not something we get to comment on much these days," the broker said, increasing its target for the stock from 700p to 730p.

HSBC, up 6p at 401p, moved up after supportive words from Nomura, which is acting as one of the senior co-lead managers of the bank's £12.5bn rights issue. Arguing that the lender's stock remained a relatively defensive bet, the broker said that, notwithstanding the HSBC Finance division, "the group's balance sheet remains stronger than most banks in our view, in terms of capital, funding and, most importantly, asset quality".

Also on the upside, Wolseley, the construction materials group, jumped to 181.1p, up 20.1p, as speculators anticipated a £1bn-plus rights issue this morning.

Defensives lagged behind as the market rallied, with AstraZeneca easing by 25p to 2,213p.

Elsewhere, Brixton was sold down to record lows, losing 12 per cent, or 3.2p, to 23.7p after Fitch put its rating for the commercial property group on negative watch, citing "increased concerns over possible reductions in covenant, and also debt maturities coming due within the next two years". Brixton's construction sector peer Segro, on the other hand, surged to 97p, up 18.2 per cent or 15p, as the market welcomed its £500m rights issue.

KBC Peel Hunt said that although the fundraising was greatly dilutive, Segro had "managed to raise a substantial amount of capital and beaten its contemporary Brixton to the market".

Cattles, the doorstep lender that slumped by about 40 per cent in the session before, was down another 3.2 per cent, or 0.1p, at 3p after Citigroup said that, in light of the company's recent update to its impairment provision review, there was an 80 per cent chance that the equity value would fall to zero.

Hays, the mid-cap staffing group, was unsettled, losing 1.2p to 71.2p after Royal Bank of Scotland reduced its target for the stock to 95p.

In other broker-driven news, Aveva, the engineering software group, gained 9.2 per cent, or 43p, to 508p after UBS moved the stock from "neutral" to "buy" on grounds of valuation. "[Recent underperformance] leaves the shares looking undervalued on our below-consensus numbers," the broker said, setting a 600p target price for the software group's stock.

Among smaller companies, the housebuilder Taylor Wimpey eased by 0.2p to 18.2p after announcing a further deferral of loan covenant tests as it continues debt talks with lenders. The company said it now expects to conclude the financing discussions by April, not March as previously indicated.

Metnor became the latest company to announce its intention to delist from the Alternative Investment Market. The property services group, which slumped by 31.2 per cent, or 12.5p, to 27.5p, said it was seeking shareholder approval to leave the growth market, citing factors such as the costs associated with maintaining the listing and the lack of liquidity in its ordinary shares.

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