Market Report: Mining giants rise on merger approval

  • @BawdenTom

Shareholders in Glencore and Xstrata were in jubilant form yesterday after Europe gave the green light to their plans for a £56bn mega-merger, in a decision which means the deal is now as good as done.

Three days after both companies' shareholders approved their plan to create a mining and commodities trading powerhouse, the EU cleared the deal on competition grounds, with only the relatively small concession that Glencore terminate its contracts to sell the zinc output of Switzerland's Nyrstar. Glencore's shares added 6.6p, or 2.0 per cent, to end the day at 340.7p, and Xstrata's rose by 17p, or 1.7 per cent, to 1,014p.

Although the pair still need regulatory clearance from China and South Africa, analysts believe it will comfortably secure the green light from both countries within the next few months.

Elsewhere on the markets, energy and resources companies were the big winners, after encouraging news from China, which showed that the manufacturing output of the world's biggest consumer of raw materials increased for the first time in more than a year this month.

The Chinese HSBC Flash Manufacturing PMI rose to 50.4 in November, moving above the 50 mark that separates growth from contraction for the first time in 13 months and offering fresh proof of recovery in the world's second largest economy. The bullish report was all the more cheering to the market, coming hard on the heels of a survey from the US on Wednesday which showed that manufacturing in the world's biggest economy picked up at the fastest rate in five months in November.

Evraz, the London-listed, Russia-focused steelmaker, saw its shares increase by 11p to 237.3p, while among the miners, Vedanta Resources increased by 17p to 1074p, Kazakhmys rose 9.5p to 692.5p, and Rio Tinto rose by 13p to 3,010p. BP increased by 0.6p to 433.6p, as the Russian government and the Rosneft board both approved the £17bn sale of its 50 per cent stake in TNK-BP, its Russian joint venture, to Rosneft.

The growth in resource-related stocks helped to drive the FTSE 100 to its fourth consecutive daily rise, as the blue-chip index added 39 points, or 0.68 per cent, to close at 5791.03 points.

In the financial neck of the woods, shares in Man Group rose by 6 per cent on reports that the world's largest hedge fund is experimenting with a new way of improving results at its flagship AHL computerised fund.

The $16.3bn (£10.2bn) fund is thought to have moved about $1.5bn of its assets into a new vehicle dubbed Evolution as it attempts to boost its ailing returns – and it appears to be working, with the pioneering portion of the fund producing an 18 per cent return so far this year. Man's shares added 4.5p to close at 77.5p.

Evolution will continue its parent's policy of using complex algorithms and mathematical models to automatically trade in and out of markets where it senses opportunities. But it will extend its remit from just futures contracts to more esoteric markets such as emerging market interest rate derivatives, credit indices and electricity contracts.

On the romantic side of things, shares in Cupid soared by 5.6 per cent after the internet matchmaker behind such websites as and said it was growing so strongly that it is "now delivering a financial performance that is at least one year ahead of where the company expected to be when it floated in June 2010".

The City marked up Cupid's shares by 10.0p to 187p as the bullish trading statement added fuel to rumours that the US owner of could be ready to pounce on the company.

The aerospace and defence supplier Cobham saw its shares increase by 6p to 202.5p after its aviation division announced that it had secured a £42m contract to fly BHP Billiton miners in and out of remote mines in Yandi, which is based in the middle of nowhere, 1,100km north-east of Perth.

On the downward side of the market, the troubled miner Talvivaara also saw its stock decline – by 3.85p to 99.95p – after investors decided that the previous day's 2.8 per cent rise may have been a slight over-reaction. That jump was spurred by news that the company could restart its metals plant in Finland after a toxic waste water leakage was discovered earlier this month. Bumi, the London listed, Indonesia-focused coal miner co-founded by Nat Rothschild, fell by 7p to 259.8p amid continuing uncertainty about the future of the company.

Overall, trading volumes were thin as the markets in the US shut for Thanksgiving.