Market update - 26 November

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The FTSE 100 was down 59.86 points at 4111.39 while the FTSE 250 climbed to 5885.93, up 52.94 points, at 12.05pm.

Rio Tinto, down 3.55 per cent or 55p at 1495p, continued to trade lower despite some strength in the wider sector as investors focused on the company’s debt position. The concerns surfaced after BHP Billion, up 2.76 per cent or 28p at 1082, said it was no longer interested in acquiring Rio given, among other things, the prospective levels of debt at the combined group.

Other miners were strong and supported the benchmark index after China moved to slash interest rates to stimulate its economy. Antofagasta, which fell in sympathy with Rio on Tuesday, rebounded to 433.25p, up 8 per cent or 32p. Fresnillo was up 5.09 per cent or 6.5p at 134.2p and Vedanta Resources was up 3.54 per cent or 18p at 527p.

Moving up

Johnson Matthey was the strongest on the Footsie, gaining 13.49 per cent or 97.5p to 820p after positing an in-line first half report and guiding that full year earnings per shares should grow by 1-5 per cent.

AstraZeneca was firm, advancing to 2412p, up 1.82 per cent or 43p. Investors bought in after the pharma group said it had settled the Pulmicort Respules patent infringement case against Iva Pharmaceuticals.

“This news brings some upside surprise for AstraZeneca in our view, although given the confidentially of the agreement it is difficult to quantify,” said Cazenove, reiterating its “in-line” rating on the stock.

Moving down

Cazenove also weighed in on the life insurance sector, which was on the back foot this morning with Friends Provident losing a per cent or 0.7p to 68.3p and Standard Life easing back to 256.6p, down 6.04 per cent or 16.5p. Aviva was down 2.25p at 357.75p and Old Mutual slipped to 48.9p, down 0.1p.

“The UK life sector looks cheap relative to historic valuation multiples, but this reflects legitimate fears of dividend cuts, or even rights issues, due to asset declines and the potential need to repair solvency buffers,” Cazenove said, adding:

“Solvency surpluses fell by 9 per cent in the third quarter and have probably fallen a further 5 per cent in the fourth quarter, with equity falls beings partly offset by lower risk free rates. Corporate bond default risk looms large, given record spreads.”