Market Report: 'Safe haven' Anglo hit by consumption concerns

Anglo American was weak yesterday after commodities prices eased on concerns about global consumption.

US crude oil was $5.45 cheaper at $133.29 per barrel, while London Brent crude was $4.85 weaker at 133.90 per barrel yesterday afternoon. Metal prices, taking their cue from the oil price, also retreated. As a result, Anglo closed down 77p at 2,736p.

The stock suffered despite words of support from Goldman Sachs, whose analysts cast Anglo as a "safe haven" if a Chinese slowdown is sharper than expected. Positive sentiment from Citigroup, whose analysts reiterated their "buy" rating, also failed to support the stock. "We believe that now is the right time to buy the quality names in the mining sector," said Citi, to little effect.

Traders said investors were catching up with the turmoil in the financial markets. The recent strength in commodities prices has been in stark contrast to a sharp derating in equities. But, they added, while an economic slowdown will bear on earnings, it will also hinder consumption and hence bear on resources stocks. Late news that the US crude oil inventories were higher than expected served to cement the sell-off in the sector, and Vedanta Resources, which too was recommended by Goldman for its commodity mix and relatively high cash return profit, closed down 45p at 1,848p.

Among oil and gas companies, Tullow Oil lost 32.5p to 788p, Royal Dutch Shell was 60p weaker at 1,805p, and Cairn Energy slid 73p to 2,596p.

Elsewhere, reports that the China Development Bank would not participate in Barclays' cash call, rumours that Royal Bank of Scotland may reveal fresh writedowns and concern about the latter's North American franchise kept investors away from the banking sector in the morning. But later, after Barclays said the transaction with the CDB was proceeding as planned, and concern about RBS subsided following early strength in American financials, leading stocks recovered and by the close Barclays was up 6.25p at 266.75p. RBS, which hit a low of 144.2p in the morning, strengthened to 165p, down 2.3p. HBOS, which hit a low of 225p, recovered to 254.5p, down 5.5p.

The FTSE 100 was down 21.3, or 0.4 per cent, at 5,150.6, held back by the resources stocks. On the upside, the dip in the price of oil helped British Airways gain almost 7 per cent, or 14.5p, to 225.25p, and TUI Travel, which was up 12p at 188.6p.

The FTSE 250 gained 135.2, or 1.6 per cent, to 8,414.5.

On the FTSE 100, the insurance group Admiral claimed first place, up almost 11 per cent, or 76.5p, at 783p, following the release of positive industry data from the Automobile Association, which said that £20 had been added to the average quoted premium for comprehensive car insurance in the three months to the end of June.

Also on the FTSE 100, Carnival, the cruise operator behind the Cunard Line, gained 63p to 1,526p. The strength was due to the decline in the oil price, and, in contrast to the turn of events in the mining sector, came despite some negative broker comment.

Exane BNP Paribas reiterated its "underperform" rating on the stock, highlighting concerns about the impact of changes in the airline industry, which is trying to adjust to higher fuel costs in the longer term.

"A significant portion of customers need to fly to reach their port of embarkation. Hence cuts in airline capacity coupled with increased air-ticket prices due to soaring fuel prices will put pressure on the overall cruise price package," said the broker.

On the FTSE 250, Trinity Mirror rose by 10.5 per cent, or 5.75p, to 60.5p. The stock soared after the company hit back at recent comment about its debt facilities and pension liabilities. Trinity said it was trading "comfortably" within the covenants for its debt facilities. The newspaper publisher added that "there are no liquidity issues" with any of its pension schemes.

The reassuring comments also boosted its sector peer Johnston Press, which gained 2p to 37.25p.

On the downside, Yell lost 2p to 59.25p after UBS reduced its target price for the stock to 65p from 135p. The broker said: "We believe the Yell share price will remain highly volatile over the coming months ... [The directories group] has limited ability to take out further costs without causing a further deterioration in revenues.

"Leverage is high at 5 times net debt/Ebitda [earnings before interest, taxes, depreciation and amortisation], and balance sheet concerns will likely persist."

Among smaller companies, Blinkx, the AIM-listed video search engine, gained 20.55 per cent, or 3.75p, to 22p after the company signed a partnership agreement with MSN UK. Separately, Blinkx also announced a deal with Rambler, a Russian portal.