Market Report: Miners subside after gold price plunge

Getting on the wrong side of your regulator is a bad idea. Particularly  in financial services

Investors who have been relying on the notion that if the price of gold is down, the stock market will be up, were sorely disappointed yesterday. The old adage that investing in shares is a bet on future prosperity while buying gold is a bet on future disaster and that the two are inversely correlated – travelling in opposite directions – is now looking decidedly rusty.

Metal prices were in free fall following a stumble on Friday and the FTSE 100 lost 40 points yesterday.

The cause of the gold sell-off was laid at the door of the world’s biggest commodity consumer, China. Its GDP, coming in at 0.3 per cent lower than expected at  7.7 per cent was the motive for getting out of gold, while fears of central banks tightening monetary policy to “rein in” inflation didn’t help either.

Miners  – who make up more than  10 per cent of the entire FTSE 100 – were the worst performers of the day with gold miners the most tarnished. Mexico’s Fresnillo fell a massive 15 per cent – or 193p – to 1,080p – taking the wooden spoon. The Russian precious metals miner Polymetal ended the day down 113p on 746p and African-focused Randgold Resources was blemished by a 413p fall to 4,545p.

Shaun Port, the chief investment officer at online fund manager Nutmeg.com, said: “Gold no longer trades as a safe-haven asset… Now gold moves in a similar fashion to equities – it is “positively correlated”. When global stock markets fell abruptly in April/May 2012 and again in October/November, gold prices also fell. As such, gold no longer trades as a useful insurance policy against a major economic or market shock.”

Analysts at CMC Markets think the yellow metal could fall as far as the $1,310 level– last seen in 2011. The FTSE 100 declined 40.79 points  to 6,343.6.

Across the rest of the blue chips there were still some stocks in positive territory despite the wide sell-off.

Shareholders in GlaxoSmithKline were breathing a sigh of relief on news that the US Food and Drug Administration thinks its drug, Breo, a treatment for lung disease and other illnesses linked with breathing difficulties, is broadly safe and consistent with similar drugs. The shares recovered 61p to 1,630.5p.

Another riser on the blue chips was United Utilities, the UK’s largest listed water company. Reports of bid speculation in the weekend papers helped pump up further rumours about a foreign infrastructure fund taking a look.

The company appointed Goldman Sachs, reportedly to “strengthen defences” against the bid, but Marc Kimsey at Accendo Markets reckons there could be more to the appointment. He said: “As recently as January, Goldman Sachs was said to be representing a consortium interested in making a bid. The weekend press stated the latest addition to United Utilities’ team of advisers is to ‘strengthen defences’ against a takeover. Or perhaps they’ve been appointed to facilitate?”

Investors flowed in to United Utilities and the shares trickled up 18p to 739p. Severn Trent also got a boost from the takeover talk, adding 27p to 1,733p.

The weekend papers flushed out a statement from CVC Capital Partners on its interest in online bookie, Betfair.

In a statement, CVC, the private-equity fund that owns Formula One, admitted it has had “preliminary discussions with Richard Koch, Antony Ball and partners regarding options in respect of Betfair” and investors placed their bets as shares added 82.5p to 782p.

In contrast, there was a profit warning from mid-cap betting firm Ladbrokes. Cold weather put a freeze on punters for the bookies at traditionally successful events such as Cheltenham. The bookmaker lost 16.6p to 190.3p.

Ted Baker was in fashion after scribblers at Goldman Sachs raised its target price to 1,600p from 1,300p. They think there is a “large opportunity for Ted Baker in US department stores, where it is currently significantly underpenetrated”. Ted Baker stumbled down 36p to 1,255p.

Aim-listed Scottish football club Rangers International said it has commissioned an independent examination and report in response to media reports relating to allegations made by Craig Whyte, the previous owner of Rangers, about its chief executive,  Charles Green, and commercial director, Imran Ahmad. The pair strenuously deny any wrongdoing but the shares dribbled down 3.5p to 62p.

 

Buy: Tullow Oil

Snap up Tullow Oil, analysts at Jefferies insist. The broker’s Brendan Warn and his oil team think that the explorer “offers exploration-driven upside” because it has balanced its “project development exposure” with its operational cashflow. They give the shares, which are currently 1,097p, a 1,800p price target and think that “rich, near-term newsflow” will spout from its wells across French Guiana,  Kenya, Ghana and Uganda.

Sell: Fidessa

Get shot of Fidessa, Peel Hunt advises. The broker says the financial IT business’ “core equity markets have yet to stabilise” and that growth is “offset by headwinds”. “Any recovery is unlikely to have a material positive impact this year,” it adds. The company’s shares are 1,776p with a 1,600p target.

Hold: Rentokil Initial

Panmure Gordon has raised its share price target on Rentokil from 85p a pop to 97p based on its sum of the parts analysis, but otherwise says now “is not a good entry point for new investors” in the Queen’s ratcatcher. The broker adds that shares, presently at 97.3p, “look overvalued, with disposals required to unlock future value”.

Start your day with The Independent, sign up for daily news emails
Sport
England's women celebrate after their 3rd place play-off win against Germany
Women's World CupFara Williams converts penalty to secure victory and bronze medals
Arts and Entertainment
Ricardo by Edward Sutcliffe, 2014
artPortraits of LA cricketers from notorious suburb go on display
News
newsHillary Clinton comments on viral Humans of New York photo of gay teenager
Arts and Entertainment
The gang rape scene in the Royal Opera’s production of Gioachino Rossini’s Guillaume Tell has caused huge controversy
music
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test