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Metals weigh heavy on blue chip index

This article is more than 17 years old

Mining companies took the shine off the market yesterday, dragging the blue chip index lower, as commodity prices continued to be volatile and traders decided to take some cash out of a sector that has seen a spectacular run.

The price of metals including copper and gold fell following China's decision to raise interest rates, prompting fears that demand from the country will slow. The mining sector was also depressed by a rather uninspiring production report from BHP Billiton yesterday, which led Goldman Sachs to drop its recommendation on the company yesterday. BHP Billiton closed down 33.5p at £11.38½ with Antofagasta down 110p at £23.58 and Xstrata down 66p at £20.15.

The FTSE 100 closed down 44.3 points at 6,060 exactly. Shares in PartyGaming were the day's biggest risers, up 6.75p at 152.75p on reports that the American Gaming Association wants to set up a Congressional study to examine the regulation of online gaming, an admission that perhaps the industry will not be outlawed after all.

Vodafone staged something of a rally, adding 2.75p to 130.5p on talk that it is getting to grips with costs within its core German business, which has been badly hit by intense competition in recent months. Reports suggested that as many as 2,500 of the company's 9,300 German workers could lose their jobs but Vodafone insiders denied any job cuts were being planned. The business is, however, going through a redeployment of staff so some losses are expected.

Away from the blue chips, the FTSE 250 closed down 72 points at 9,925.6 with the small cap down 24.8 at 3,632.5.

A positive trading update saw shares in safety products firm Halma add 8p to 188p while Crest Nicholson added 3p to 535.5p after reports that Bovis Homes wants to buy Gerald Ronson's 23.3% stake. Among the small caps, Regent Inns shot up 9.25p to 117.25p after the owner of Walkabout and Jongleurs admitted it had received a takeover approach, understood to be from the private equity group Alchemy Partners, owner of Spirit Group's high-street bars.

Altium Securities reckons a takeout price of 120p to 130p would win the day and regardless of whether this - tentative - approach results in a concrete offer, the company must "eat or be eaten" and frankly it is more likely to be prey than a predator.

Mark Brumby, at Oriel Securities, pointed out that consolidation made perfect sense and an existing operator - such as Alchemy - would be able to wring synergies from any deal.

Cardpoint added 7.25p to 109.75p as the cash machine operator confirmed that it too had received a bid approach and discussions are continuing to assess its seriousness. There has been talk of a bid at 150p a share from a US buyer, rumoured to be GE Capital.

Shares in Ark Therapeutics rose 5.5p to 87p after the drugmaker announced plans to raise £27.1m through a placing of 31.9m shares at 85p - to fund further development and launch its second product. Despite some confusion caused by a poorly worded statement from Ark, neither the funds run by Merlin, the bioscience group chaired by Chris Evans, nor the investment bank Nomura, which led the original financing of Ark, is selling shares in the placing.

Ark added in a trading update that it has continued to make good progress with its drug development programme and is generally confident about the coming year.

Shares in Clinton Cards eased 1p to 57.75p as the retailer dropped into the red, in line with a profit warning back in January. Over the year to January 29, the company made a loss of £338,000 against a £30m profit the previous year as it struggled with tough market conditions.

Clinton warned that trading in the last six months of the year was subdued and in the run-up to Christmas it was the most challenging the company has experienced for years.

On Aim, Finsbury Food Group added 6.5p to 68.5p after a positive trading update from the cake maker, which led the house broker Panmure Gordon to reiterate its buy recommendation. The technology firm OMG rose 4.5p to 29p after announcing it had seen its best ever first six months of a year. As a result, Evolution Securities upgraded its forecasts.

There have been concerns recently that shares in EG Solutions, an operations management specialist, could be depressed when the 12-month lock-in for founder Elizabeth Gooch ends in June, on the anniversary of the firm's flotation. She owns just over half of the firm. Sources close to the company, which has seen its shares rocket from 85p to close unchanged yesterday at 168.5p, maintain there is strong institutional demand more than capable of mopping up any stock she may sell.

This month Ms Gooch released 950,000 shares, 6.6% of the company, to house broker Brewin Dolphin after calls from a number of institutions for shares in the tightly held firm. Brewin placed them at 150p with investors believed to include Goldman Sachs.

Aim hosted Baltic Oil Terminals with shares in the firm, set up to invest in oil infrastructure projects in the former Soviet Union, placed at 140p, valuing it at £60m. Their first day ended at 165p.

Cheaper pollution

The carbon trading market hit more volatility yesterday as the price plunged to less than half the level of a week ago. News that a number of European countries emitted less carbon dioxide than expected last year has sent carbon credits - certificates which companies can buy allowing them to exceed permitted emission levels - down to €14 yesterday, against the €31 level seen last week. The price later recovered to €17. Industry experts are concerned the fall, which effectively makes pollution cheaper, could hit hopes of reducing emission levels. The fall also dragged down energy prices, hitting shares in companies which have little exposure to carbon but greater exposure to the energy price. British Energy, for example, fell 24.5p to 657.5p.

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