Market Report: Qatar smiles on 'Glenstrata' tie-up

Xstrata and Glencore's long-running quest to merge into a £56bn mining and commodities trading giant took what could well prove to be the decisive step forward yesterday when Qatar smiled on the proposed deal.

Although he stopped short of pledging to recommend the tie-up in the forthcoming shareholder vote, Qatar's prime minister said he was "looking in favour of a merger" after Glencore sweetened the terms of its offer following opposition from the Gulf state's sovereign wealth fund to its first proposal.

With a 12 per cent stake in Xstrata – and Glencore unable to vote its 34 per cent holding in the company – Qatar pretty much holds the whip hand, meaning a deal just got a lot more likely yesterday. Not that you'd think it from the subdued investor reaction, with Glencore rising by just 0.2p to 336.8p and Xstrata actually falling, by 1.4p to 952.0p.

But then miners had a rough old day yesterday and, but for the good news, "Glenstrata" would no doubt have fallen more heavily yesterday.

Overall, the FTSE 100 index rose by 12.29 points to close at 5,805.6 points, as gains from the banks were balanced out by losses from the miners.

The miners fell amid concerns among traders who fear that the latest growth data from China on Thursday could show the world's biggest metal consumer running out of steam. Rio Tinto lost 48.5p, or 1.6 per cent, to close at 2,973.5p, Anglo American fell by 36.0p to 1788.5p and Kazakhymys tumbled by 25.5p to 690.0p. Evraz, the steelmaker backed by Chelsea football club controller Roman Abramovich, fell by 5.1p to 229.2p.

Banking shares led the risers on hopes that Spain might finally bow to pressure and ask for a bailout, in a stabilising move that would reduce its borrowing costs. Lloyds Banking Group rose 0.62p to 40.32p, and Standard Chartered was up 34.0p to 1461.5p.

Tullow Oil, the FTSE 100 Africa-focused explorer, informed the market that it's going to have a stab at Greenland. Cairn Energy's repeatedly unsuccessful attempts to discover oil in a region for which there are high hopes, but no commercially viable discoveries so far, has not put Tullow off. The company announced yesterday that it will be looking for oil off the coast of north-west Greenland through a partnership with Denmark's Maersk Oil after buying 40 per cent of its Tooq licence. Tullow's shares rose by 11.0p to 1415.0p, as investors weighed the prospect of hitting a new oil frontier against the fact that this kind of discovery is always going to be a long shot.

Over in the hedge fund world, yesterday marked the first time that the three principals of GLG were able to dispose of the holding in Man Group that they received for their GLG shares when it was taken over by Man two years ago.

Pierre Lagrange, Emmanuel Roman and Noam Gottesman declined to comment on whether they would be taking advantage of their "lock-up" periods ending, although the smart money is that they may choose to wait a bit longer. The trio have collectively made a paper loss of $220m (£137m) since the share swap on 14 October 2010, dropping from 264p.They closed at 90.1p yesterday, 0.1p down on the day.

Virgin Rail (in which Stagecoach has a 49 per cent stake) was given the green light to run the West Coast Main Line for at least another nine months after its current franchise. However, Stagecoach shares dipped slightly, by 1.3p to 280.5p, because the length of the extension has yet to be resolved and there is still much confusion about the longer-term status of the contract.

BT also suffered, falling by 1.7p to 217.0p after analysts from Barclays cut their recommendation on its shares from "overweight" to "equal weight" and reduced their price target from 260p to 230p. Barclays was concerned that the tough economy could dent BT's corporate revenues and that its recent move into sports broadcasting as it won a package of premiership matches would increase its cost base.

But the award for the most frustrated company in Britain has to go to chipmaker Wolfson Microelectronics. It has reportedly just landed a contract with that mother of all clients – Apple. The reports pushed its shares up by 8.75p to 210.25p, but the jump could have been much higher, had Wolfson even been able to whisper its new customer from the basement. It's a great development for Wolfson, which lost Apple as a client back in 2008.

FTSE 100 Risers

Kingfisher 275.8p (up 7.3p, 2.7 per cent) The B&Q owner's shares are boosted after saying it is considering launching its UK Screwfix tool, plumbing and electrical chain in France.

HSBC 600.3p (up 5.0p, 0.84 per cent) The banking giant benefits from widespread sentiment in the sector on hopes Spain will bite the bullet and seek a bailout, which would reduce its borrowing costs.

FTSE 100 Fallers

ENRC 319.8p (down 9.1p, 2.7 per cent) The miner suffered from fears yesterday that the Chinese economy could be slowing down, in a move that would reduce its demand for raw materials.

RBS 268.1p (down 2.8p, 1.0 per cent) The bank continued to suffer yesterday following the collapse of its agreed £1.65bn sale of 316 branches to Spain's Santander.

FTSE 250 Risers

Filtrona 548.0p (up 38.0p, 7.5 per cent) Shares in Filtrona jumped as the foam product supplier reported a 23 per cent rise in third-quarter sales and said it was looking at a number of potential acquisitions.

Bovis Homes 504.0p (up 9.3p, 1.9 per cent) The homebuilder benefited as JPMorgan raised its recommendation on the group's shares from "neutral weighting" to "overweight".

FTSE 250 Fallers

Bumi 245.3p (down 34.7p, or 12.4 per cent) The London-listed, Indonesia-focused miner fell yesterday after rising at the end of last week when the Bakrie family, a key shareholder, offered to buy out the company's assets.

SDL 568.0p (down 72.0p, 11.3 per cent) The business consultant suffered as Investec cut its rating on the shares from "buy" to "hold".