Market Report: Vedanta hits highs but fails to impress

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The Independent Online

Record production appears to be no longer good enough for the City. Yesterday oil, gas and metals group Vedanta Resources slumped to the bottom of the benchmark index despite revealing record oil and gas production as well as increased production of zinc, lead and silver.

But there was no pleasing analysts at Morgan Stanley, who warned that Vedanta's copper assets were overvalued compared to rivals. Morgan Stanley downgraded the group, founded 37 years ago by Indian businessman Anil Agarwal, to underweight and it found itself in a hole, down 50p to 1,020p.

Scribblers at Liberum Capital were a little kinder and said the results were "uneventful". But they admitted a downgrade in Zambian copper production was worrying, and rated the group a hold.

Liberum also said it is trading at a 10 per cent discount to the "sum of the parts" but without a stronger oil price or weaker rupee there is no catalyst to buy as yet.

The gold price remained lacklustre and miner Randgold Resources lost 125p to 4,295p and accompanied Vedanta near the bottom.

The blue-chip index spent its third day in negative territory with the FTSE 100 index down 29.91 points at 6335.92. Traders were still concerned about the US shutdown and the looming debt issues. Alastair McCaig, market analyst at spread better IG, said traders' "confidence that the US will get its act together is slowly turning into fear".

Alastair Winter, the chief economist at Daniel Stewart & Co, said: "Washington is sounding more and more like a very noisy game of poker rather than a shoot-out. Mr Obama still has the best hand and the moderates in the GOP will surely quit by next week."

Will we ever tire of talking about house prices? The City was back to one of its favourite subjects: Help to Buy and the housebuilders. Goldman Sachs' experts ran the number on the likes of Persimmon and Crest Nicholson, and decided it's still worth buying into the sector.

They noted that the "lead indicators" such as UK mortgage approvals and Rics Survey data strongly indicated a rebound in housing activity with "forward sales for UK housebuilders currently up around 50 per cent", in part "stimulated by the Help To Buy shared equity scheme".

So Goldman declared there will be a "meaningful transactions recovery from 2014" for the home makers. Its top pick was builder Taylor Wimpey, which got added to the Conviction Buy List to join agent Rightmove and Persimmon.

Goldman also rated Crest Nicholson, up 13.7p at 343.5p, and property agent LSL, up 1.5p at 452p, because both offer "leading cash returns relative to their peer groups". They also expect "strong margin expansion as a result of the recovering UK housing market".

Despite most builders having already enjoyed huge gains this year, Goldman's decree sent Persimmon to the top of the table – up 54p to 1,131p. On the mid-tier table, the builders dominated the top 10 risers with Taylor Wimpey close to the top, up 5.1p to 103.8p, Barratt Developments 11.1p better at 320p. Bellway built up a 50p gain to 1,320p. However, Rightmove fell 3p to 2,357p.

Smartphone tech experts were not looking so smart yesterday as a weaker performance from Apple appeared to rub off on to the stock. Smartphone microchip designer Arm Holdings was 32p weaker at 945.5p and Imagination Technologies fell 32p to 945.5p.

Retailer Marks & Spencer has faced criticism in the past few days but analysts at Nomura came out in favour today with a buy note, and the retailer recovered 4.9p to 468.7p.

Mid-tier Egyptian gold miner Centamin was 0.56p brighter to 45.58p after a strong quarterly production update. The group mines on Sukari hill, which last hosted gold diggers during the time of the pharaohs. It said it is on track to beat forecasts of 320,000 ounces of gold for the full year. Miner Black Mountain Resources reported high silver grades in samples at its project in Montana, US, and was 0.25p brighter at 6.75p.