Market Report: Surge of copper miners led by Chilean operator
Tuesday 26 October 2010
There was really only one game in town yesterday, as a surge in London's miners dominated the FTSE 100. Seven of the top 10 risers were in mining, as commodity prices stormed higher.
In the wake of G20 finance ministers meeting over the weekend, and the continuing weakness of the dollar, the dominant performer was Antofag-asta, which closed the day at the top of the index. The Chilean-based copper miner was helped by Goldman Sachs, which upgraded the stock to "buy" from "neutral", as copper prices hit a 27-month high yesterday. It finished on 1,321p, a rise of 52p.
The broker also raised the price target of Kazakhmys from 1,650p to 1,790p, and investors reacted positively, sending the mining group storming higher, closing up 47p to 1,380p. Among the other risers in the sector, Xstrata saw a 1,324p increase to 34.5p despite being cut by Evolution Securities to neutral.
The strength of the sector meant the FTSE 100 was up, gaining 10.6 points to 5,751.9. Of the non-miners in the top 10, Burberry performed the best. The fashion brand saw a rise of 32p to 1,026p off the back of the weekend's news that Louis Vuitton parent LVMH had acquired a 14.2 per cent stake in Hermès. The news provided a boost for luxury stocks around the world, and Citi stated that LVMH's activities "might signal renewed M&A activity in the sector".
Burberry was not the only beneficiary of good news from overseas, as Unilever's Indian unit, Hindustan Unilever, yesterday announced a 32 per cent increase in net profit. This came in the wake of an increase in advertising and the raising of prices of certain products including soaps and detergents. In response, Unilever's shares enjoyed a 16p rise to 1,856p.
Meanwhile, InterContinental Hotel Group revealed that its revenue per room in the Americas was up nearly 7 per cent, with the strong performance coming about as a result of the relaunch of the group's Holiday Inn hotels in the region. Panmure Gordon flagged the release of third-quarter results in November as well as an investor event in the same month as "further opportunities for positive share price momentum", and increased the target price to 1,370p from 1,235p. As a result, shares in the group climbed, closing on 1,225p, an increase of 12p.
Languishing at the foot of the index was Lloyds Bank Group after Credit Suisse reduced its target price by 8p to 79p. As well as citing worries about near-term capital returns, the broker – which maintained the stock's "outperform" rating – also picked out falling prices in the property market as having a potentially negative impact. It closed at 68p, down 3.85p.
The banking sector was further hit by comments yesterday from the Business Secretary, Vince Cable, who warned against excessive bonuses. "No one listening to the Chancellor's statement last week will be under any doubt of the government's collective determination to ensure that banks act in the interests of the wider economy," he said, "and that, in the new year, they must not engage in another self-indulgent bonus round."
A note from UBS on the UK capital goods sector saw it downgrade Invensys from "buy" to "neutral", and the engineering group ended up falling 8.8p to finish at 311.6p. The broker said that the "sector may have overshot 'fair value'," adding: "The premium to the market is at peak, the discount to European engineers eradicated, our discounted cash flow valuations find little upside and some macro inventory indicators look stretched."
Also hovering near the foot of the top tier was the publishing group Pearson, which owns the Financial Times as well as Penguin. It closed on 947.5p, a drop of 28.5p, despite releasing a trading update yesterday which raised the group's profit forecast, the second time this year it has done so.
The FTSE 250 also had a strong day, finishing on 10,978.1, a gain of 83.4 points. One of the groups leading the way was the London Stock Exchange, rising 35p to 740p. It benefited from the news that emerged overnight of the S$10.7bn (£5.3bn) acquisition of the Australian Stock Exchange by the Singapore Stock Exchange, which has resulted in the creation of the fifth largest listed exchange group in the world. The sale prompted an increased appetite among traders for LSE shares, which is no stranger to rumours of a takeover itself. It closed up 35p to 740p.
Close to the top in the mid-tier was technology company Fidessa, which jumped 92p to 1,722p. Traders were unsure about why it was enjoying an uptick, but there was talk of a significant buy order in the market.
Last week, market speculation that Micro Focus International was a potential takeover target for US technology giant IBM, saw the Berkshire-based software company's shares rise. However, it struggled yesterday as traders lost their enthusiasm for the story, and it closed at 399.2p, following a drop of 12.3p.
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