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Change in sentiment on mining leads market higher

This article is more than 17 years old

Mining stocks led the market higher today, after a couple of brokers were positive on the sector.

Cazenove issued an upbeat report, saying fears of a global economic downturn were overdone, while Morgan Stanley was pushing Xstrata as its top pick among UK miners.

"Xstrata recently hosted an extremely impressive field trip to its new copper, coal and nickel assets in Latin America," said Morgan, "in which its entrepreneurial and very astute management style was clearly displayed." The recent acquisition of Falconbridge has transformed the company, the Morgan analysts said, and Xstrata is expected to take part in more merger activity, perhaps in 12-18 months.

It has a price target of £36.00, compared with the company's current level of £25.13, up 136p.

With Xstrata leading the way, mining stocks accounted for five of the top ten risers in the FTSE 100 index. Antofagasta added 14.25p to 529.5p, while Rio Tinto rose 67p to £28.50.

This helped push the FTSE 100 35.5 points higher to 6228.0. The UK market had got off to a reasonably buoyant start after reasonable overnight performances in Asia, and was later lifted by high street sales figures suggesting retailers may enjoy a merry Christmas after all.

Official numbers for November showed an unexpected rise of 0.3%, whereas forecasts had been flat.

"Online shoppers helped to boost the retail figures released today with sales in non-store retailing, which includes mail-order and internet purchases, surging by 2.9% in the month - although this accounts for just six per cent of total sales," said Thushani Gajasinghe, an economist at the Centre for Economic and Business Research.

"The rise in interest rates to 5% in November does not appear to have dented spending - and with Christmas approaching, retailers should be reassured that sales should not fall back any time soon.

"The strength of retail sales will reassure the Bank that the economy can absorb another rate rise if inflation remains high above target."

There was plenty of action on the takeover front.

Tobacco group Gallaher added 4p to £11.55 after it said it had received a preliminary cash offer at £11.40 a share. Dealers said the predator was Japan Tobacco, but other interested parties were likely to make a move.

But music group EMI plunged 32.25p to 268p after it rejected a bid approach - thought to be from private equity group Permira. EMI said it had "not received an offer that fully reflects the prospects for and value of the company".

Another takeover subject, British Airways, added 9p to 519p on continuing hopes that it might receive a bid in the wake of the takeover of Australia's Qantas.

Rentokil Initial was also wanted, up 7p to 168p with 47m shares traded, on talk of a 200p-a-share offer from a US private equity group.

A recent takeover favourite, the leisure group Whitbread, slipped 5p to £16.47p. However the company has for the first time confirmed that America's Starwood has a stake in the business, albeit below the 3% declaration limit. Many dealers are convinced that Starwood is behind the 6% shareholding declared by Credit Agricole.

Bingo and casino group Rank was steady at 236.5p, awaiting takeover developments and any news on stakebuilding by William Hill.

VT Group added 3.75p to 469.25p after it confirmed reports that it was to merge its shipyards with those of BAE Systems.

Newspaper group Trinity Mirror fell 25.25p to 472.5p after a downbeat trading statement and news that it planned to sell the Racing Post and some of its regional papers. Some investors had been hoping for a complete demerger of the business.

Elsewhere Peter Hambro Mining recovered 111p to £10.01 after Russia's environmental agency said it had no licence breaches at its core assets in the Amur region. Its shares had fallen sharply in the past two weeks after Russia suggested the licences involved should be withdrawn.

· Email business.editor@guardianunlimited.co.uk

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