Market Report: New mining controls hurt Anglo American

Fears of government intervention for miners in South Africa tarnished Anglo American on a day of rock solid gains for the rest of the benchmark index yesterday after the country's mineral resources minister Susan Shabangu told its parliament of plans of "supply and demand side interventions".

South Africa's mining belt has been plagued by strikes and terrible violence since last year and Ms Shabangu wants to avoid further interruptions and said her team will develop a "rescue plan, which will enable us to find appropriate government-wide measures" for the gold and platinum mining sectors in the country.

Earlier this month, Anglo American Platinum, 80 per cent owned by Anglo American, said it would reduce planned redundancies to 6,000 from the 14,000 it announced in January, to try to appease South Africa's government and unions.

Anglo American Platinum – Amplats – the world's largest platinum producer, fell to a loss last year and the chief executive, Chris Griffiths has been trying to find ways to return it to profit.

But news of government controls could spark profitability concerns with laws on job and cost cutting in the sector bound to worry investors.

The group was also hit by a note from analysts at JP Morgan who warned the supply/demand balance for base and precious metals has "deteriorated" in recent weeks. They rate Anglo American neutral but reduced their target price for the shares to 1,820p, down from 1,930p.

Anglo dug down towards the bottom of the blue chip index – one of only five fallers – and lost 16p to 1,540.5p.

Anglo was mainly in the company of miners as losers – the wooden spoon went to Kazakh group ENRC, down 6.8p to 248p as investors awaited an update on its takeover. A £3.3bn bid by its co-founders was rejected and they have until next Monday to return with a revised offer.

Russian miner Evraz, a likely contender to drop out of the FTSE 100 in next month's reshuffle, meanwhile declined 2.4p to 143.9p.

The rest of the market was flying as it recovered much of last Thursday and Friday's falls.

The FTSE 100 set a fresh 13-year high last week before a 2.7 per cent drop following fears of an end to financial stimulus in the US. But yesterday punters returned and the index jumped 107.67 points to 6,762.01 – the biggest one-day gain in more than a month – on expectations that stimulus in Europe will remain.

JP Morgan Cazenove's Mislav Matejka is bullish and said "equities will grind higher during the summer" as central banks will be "slow in withdrawing support" and the "inflation risk is minimal".

Top of the tree was the temporary power supplier Aggreko. Traders may have taken a look at a report by EnergyUK on the "urgent" need to meet rising energy demands and piled in. The power supplier surged 81p to 1,812p.

The oil services group Petrofac was helped up 49p to 1,389p by analysts at ABN Amro, who started covering the group with a buy recommendation and a 1,650p price target.

Traders also thought BG Group was worth a look and the oil and gas group flared up 25p to 1,219p.

Some in the City were still in the holiday mood after the long weekend and news of a takeover of Club Med helped other travel groups. The French company received a friendly £460m takeover bid on Monday from management, backed by AXA Private Equity and the Chinese conglomerate Fosun International.

Investors think the takeover is a portent of growth in the wider travel sector. Tui, which owns the Thomson and First Choice brands, travelled up 10.7p to 369.2p.

Intercontinental Hotels Group booked in a 41p gain to 1,953p and Thomas Cook, on the mid cap index, edged up 2.6p to 152.1p. Analysts at Jefferies also rated Thomas Cook a buy, with a 155p price target, as "gross margins are improving, net debt has fallen, underlying trading is brisk … and the balance sheet has strengthened".

Mid cap miner Petra Diamonds sparkled 2.2p higher to 106.4p after revealing the sale of a 25.5 carat blue diamond for $16.9m late on Friday – one of the highest prices paid for such a stone. It also had its buy rating reaffirmed by analysts at Canaccord Genuity, who gave the diamond miner a 158p price target.

AIM-listed gas specialist Leyshon Resources climbed 3.12p to 18.62p following good news on a test project in China.