Market Report: Miners in demand after ECB bond plan
Friday 07 September 2012
Mining is a risky business, but risk is back in fashion.
Talk that the commodity boom could be coming to an end fell on deaf ears yesterday as the City breathed a sigh of relief following the European Central Bank's (ECB) bond-buying plan.
Mining stock in the FTSE 100 was up 4.37 per cent on the week and in one day the mining sector added £5.92bn to the market cap of the entire FTSE 100 as investors, buoyed by hopes that the euro crisis is turning a corner, bet on riskier stock. Miner and Russia's largest steel maker, Evraz – owned by Roman Abramovich and Alexander Abramov – was top of the leader board, up 15.2p to 226.7p.
The finance sector was also flavour of the day as the banking sector stocks edged up 3 per cent on the week with Lloyds Banking Group up 2.27p to 36.2p and Barclays up 11.1p to 193.05p.
Whether or not ECB president Mario Draghi's "unlimited" bond-buying programme really is a step to easing the eurozone debt crisis, investors were in a good mood and the FTSE 100 gained 119.48 points to 5,777.34.
One of the previous day's biggest losers, the gas explorer BG Group, got a new lease of life and ballooned 39p to 1,260p as Goldman Sachs tipped it as "time to buy". Goldman scribes rated BG its "top 360 winner" and added it to their "conviction list". They claimed, that although the group's share price has been lacklustre this year, the outlook remains strong. Goldman's points to its Brazilian oil and Tanzania discoveries as plus points.
National Grid was up 9p to 699.5p, as it started a tender offer to purchase up to $300m (£188m) of its outstanding 6.3 per cent notes due in 2016, to lower the interest it is paying.
Today is decision day for the $33bn proposed mega-merger of commodities giants Glencore and miner Xstrata. Significant shareholders Qatar Holding and Norway's sovereign wealth fund, Norges Bank Investment Management, have both said they will oppose the deal at the current price on the table. But Glencore chief executive Ivan Glasenberg has been resolute in his offer of 2.8 Glencore shares for each of Xstrata's.
Glencore is the second most shorted stock on the FTSE 100 according to Data Explorers, with two-thirds of the available supply out on loan. Investors will be keenly waiting the shareholder vote. Today Glencore crept up 2.85p to 392.35p while Xstrata rose 43.9p to 979p.
Strife-hit platinum miner Lonmin was up on the mid-caps as it confirmed it had started wage talks with striking miners. Its shares were lifted 38.5p to 568p. But the peace deal does not include a deal with the Association of Mineworkers and Construction Union and there are still fears further unrest could ensue. Last month, Lonmin's Marikana mine was the scene of 44 deaths during the strikes.
The City couldn't stop themselves gossiping about further bubbles of merger talk following the proposed link-up of soft drink group's Britvic and AG Barr. One wag suggested that Austrian energy drinks giant Red Bull may still want to take a look.
Over on the small-cap market, plastics business Carclo has had to delay a shipment of smartphone touch sensors to sort out a product design issue, but said that it remains on track to deliver "progress across all of its businesses". The shares lost 28.5p to 425.5p.
Bad news at May Gurney. The recycling services and road repair provider saw its shares tumble by 41.18 per cent after saying it will "significantly underperform" expectations, and chief executive Philip Fellowes-Prynne has been put out with the rubbish. The shares collapsed 91p to 130p.
Staying with the small caps, Lamprell, the Dubai-based oil and gas rigs and wind farms servicer, had some better news after three profit warnings in three months.
Its shares have nosedived since May, but they edged up by 25.5p to 101.5p as the company announced a deal with Shoaibi Group to refurbish and repair rigs in Saudi Arabia.
Aim-listed North Sea oil firm Valiant Petroleum jumped 20p to 480p as it announced that it is "reviewing its strategic options" which could see the company being sold.
There was encouraging news for Valirx, the life science company with a focus on cancer diagnostics. It reported promising results from an early-stage breast cancer study it had completed. The shares moved up 0.06p to 0.70p.
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