Market Report: Bounding copper price puts mettle into RTZ

John Shepherd
Friday 13 May 1994 23:02

THE continuing climb in base metal prices turned the spotlight back on the RTZ mining group yesterday. A surge in the copper price of dollars 73 to a 14-month high of dollars 2,175 a tonne lifted RTZ by 11p to 859p.

Waves of buyers yesterday surged into London Metal Exchange markets as copper's strength of the past two weeks convinced speculators and investment funds that this sector was pointing firmly upwards.

'I've not seen anything like this for years. They've all broken out on the upside now,' a senior trader said.

Nickel hit a 15-month peak at dollars 6,330, aluminium reached a 22-month high, and lead and zinc were at their highest for three months.

'The market associates RTZ and copper quite strongly. If you're in the UK, there just aren't many other options if you want to play a copper or base metals stock,' one analyst said.

Stocks of copper have fallen for most of the year, with physical demand from all areas draining quality metal from warehouses. Stocks stand at a one-year low of 424,700 tonnes.

Yesterday's boost came as a welcome relief for RTZ, which has slowly drifted downwards after surging from less than 650p in November to a peak 963p by the end of January.

Volume trading in RTZ was reasonable at 2.3 million shares yesterday.

RTZ, however, was one of few gainers in the FT-SE 100 index with fresh worries about US interest rates putting the skids under blue chips in late afternoon trading.

The FT-SE 100 share index, which had wandered aimlessly for most of the day, closed 18.6 points down at 3,119.2.

There was virtually no sign of new time buying, but there were sighs of relief that the dreaded long three-week account had closed. It ended, as it started, on a low note. Overall, Footsie lost 14.5 points over the account.

Dealers said yesterday's problems stemmed from US real earnings data which broke a sequence of good economic news.

One of the biggest Footsie fallers was Unilever, down 57p to pounds 10.23p on disappointing first-quarter results which prompted some analysts to shave full year forecasts by around pounds 50m to pounds 2.4bn.

Unilever's share price fall was alone worth 2.85 Footsie points. Some 3.7 million were traded.

The news affected several other food manufacturers. Northern Foods lost 8p to 213p, Unigate retreated 7p to 391p, Hillsdown eased 2p to 175p as did Cadbury Schweppes to 488p. Reckitt & Colman lost 13p to 672p.

Poor trading news also put the skids under Whessoe, the engineering and industrial group. The shares plunged 35p to 184p.

Elsewhere, there was some lively action on the takeover front. Portals, the security printing group, announced it had received a bid approach and promptly surged 112p. It closed at 765p, up 99p.

De la Rue, widely tipped as the predator, fell 7p to 878p. There was talk that it might have to offer as much as 850p to take out Portals. That price would equate to a prospective exit multiple of 25 times' earnings.

Lasmo released its defence document against the pounds 1.45bn bid from Enterprise Oil. Enterprise firmed 2p to 431p, while Lasmo eased 2p to 154p. A heavy 16 million Lasmo were traded.

Publishers were active. First- quarter results from the Telegraph group were well received, and the shares rose 9p to 620p. The figures helped to push Daily Mail & General Trust up by 37p to pounds 14.65p. Pearson eased 5p to 673p after its annual meeting.

Grand Metropolitan, down sharply on its interim results on Thursday, shed 4p to 453p on concern about destocking of spirits in the US. Highland Distillers lost 14p to 390p.

Tottenham Hotspur slipped 3p to 88p on fears that the football club may be demoted a division following allegations by the Football Association that it had failed to disclose financial arrangements with players. Nerves ahead of today's FA Cup final clipped 3p off Manchester United to 635p.

VHE Holdings, specialist contractor, announced its first deal since flotation, with the purchase of TW Ward (Industrial Dismantling) from the receivers. Shares eased 1p to 111p despite some talk that analysts may have to sharply upgrade forecasts of pounds 4.3m pre-tax.

The long three-week account ended, as it started, on a low note, with the leading FT-SE 100 index closing 18.6 points lower at 3,119.2. The FT-SE 250 fell 20.6 points to 3,721.8. Next account ends on 3 June and settlement is on 13 June.

Shares in Diploma were a weak market ahead of interim results due on Monday. The price, down 8p to 532p yesterday, has been in steady decline since peaking at 626p in February. Analysts expect the electronic components to steel lintels group to make about pounds 25m pre-tax for the full year. Talk yesterday was that the building materials side was continuing to have a tough time.

Dealings in shares in Bula Resources were suspended at 3.5p pending shareholder approval of a dollars 5.6m purchase in Russia which was announced yesterday. The exploration company wants to buy a 51 per cent stake in Aki-Otyr, a joint venture company with oil-producing licences in western Siberia. Licences are on fields with probable reserves in excess of 500 million barrels.

Investors' love of Bluebird Toys continues to blossom. Shares in the maker of the best-selling Mighty Max and Polly Pocket toys were chased up another 55p to 808p. Speculation yesterday was that it would next week report strong sales growth for the first quarter of 1994. Annual profit forecasts hover around pounds 12m, placing the shares in the cash-rich company on a p/e of 11.5.

(Graph omitted)

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