Market Report: Investors dig into Vedanta as broker ups target

Deutsche Bank gave a boost to miners, who dominated the market yesterday.

In a note enthusiastically entitled "Q2 revisions: Mining solid!", Deutsche said that while the FTSE mining index is flat since the start of the year, it has performed better than the broader FTSE 100 index, which is off 11 per cent over the same period.

"This [mining flat, FTSE 100 down] has occurred against the backdrop of a major financial market crisis and clear evidence of weakening economic growth," the broker said, "The debate for many investors has been whether to chase the beleaguered banks, the chastened property market or the indebted consumer-related sectors, so the relative attractiveness of the cash-generating resource stocks has not surprised us."

Deutsche raised its target price for Vedanta Resources, to 2,640p from 2,610p, helping it climb to second on the FTSE 100 leader board, up 67p to 2,133p. Antofagasta, whose target price was raised to 740p from 680p, claimed fourth place, gaining 18p to 675.5p. Anglo American, whose target price was raised to 3,870p from 3,800p, was gained 29p to 3,020p.

Overall, the FTSE 100 index was down 24.6 points to 5,692.90. The London benchmark was kept in the red by some weak house price data and by a low reading on the GfK NOP UK consumer confidence index, which fell by 2 points to -19 last month, its lowest level since February 1993. The FTSE 250 was also weak and lost 20.7 points to 9961.30.

Weak consumer confidence took its toll on the retail sector, where Marks & Spencer was down 12.25p to 396.25p. Other retailers, including Debenhams and the Home Retail Group, which lost 5.50p to 262.50p, were also down.

On the FTSE 250, Shaftesbury said that Laxey Partners had raised its stake in the company to 14.49 per cent. Market chatter over the past week has suggested that Laxey is preparing to mount a bid for the property company, possibly offering up to £8 per share for the business. The talk, which surfaced again yesterday, has focused on Laxey's recently floated Terra Catalyst Fund. The fund was set up to invest in property-related securities and, according to a list of investment policies, its strategy "may also involve it making takeover offers for portfolio companies and taking management control of such companies".

News of the share holding sent Shaftesbury down 5p to 580p.

Elsewhere, the termination of takeover talks hurt Mapeley, which was lodged at first place on the FTSE 250 loser board. Disheartened investors took the stock down by just over 15 per cent, or 236p, to 1321p.

Barratt Developments was depressed after analysts at Panmure Gordon published a bearish note on the company. "The house building sector has witnessed strong share price appreciation in recent days with stocks rising between 10-20 per cent," wrote the Panmure analysts Rachel Waring and Mark Huges. "We believe Barratt has run too far, too soon and therefore move our recommendation to Sell from Hold.

"The Barratt share price has risen by 31 per cent since 9 January and has appreciated 16 per cent over the past eight days. Despite the collapse in the share price last year, we believe that the stock has run too far from its lows... We believe that any sustained house price deflation could leave the business vulnerable to asset write-downs later in the year." Barratt's stock fell 27.25p to 410.75p.

The note contributed to weakness in the wider sector. The market was worried by the Nationwide Building Society report which said that house prices fell by 0.6 per cent in March, reducing the rate of annual inflation to 1.1 per cent, the slowest rate since March 1996. As a result, among FTSE 250-listed house builders, Bellway was down 11p to 874p, Redrow lost 1.75p to 312.75p, and Berkeley Group Holdings was down 19p to 1087p.

Bad broker sentiment hit DSG International, which was downgraded to "sell" from "neutral" at Pali International. "With UK mortgage rates on the rise and UK consumer confidence at a 15-year low the time has come to downgrade DSG, after the recent dead-cat bounce up to 68p," said Nick Bubb, Pali's retail analyst. The company's stock fell 3.75p to 64.50p.

On AIM, Spice, the infrastructure support services firm, gained 2.50p to 426.50p yesterday. The company was boosted by Citigroup, which initiated coverage on the company with a "buy" rating. Citi thinks that, in the next year, the business will transition "from AIM to small Cap and then potentially to Mid Cap", adding: "Spice's exceptional growth and the recent acquisition of RAS [Revenue Assurance Services] for £101m, increases the risk that it cannot control the growth.

"However, management is experienced, the business is decentralised and we see no reason why there should be a systemic failure."