Miners led the market lower today, on a combination of falling metals prices, a possible strike in South Africa and broker downgrades.
Lonmin, the platinum specialist, fell 135p to £37.90 after UBS downgraded its recommendation from buy to neutral. The bank said demand for platinum was likely to continue growing strongly, but it has cut its 2007 and 2008 earnings forecasts for Lonmin after a disappointing first half performance. "We believe the share is evenly balanced between upside and downside risks," said UBS, so although it has raised its price target from £34 to £40, it reduced its rating.
As far as any bid for Lonmin was concerned, UBS suggested the business looked expensive compared with other mining companies.
Meanwhile Numis analysts pointed out that there was a risk of further strike action by South African platinum producers over pay, which could lead to higher mining costs for the companies if the workers win concessions. However later reports suggested that striking miners at two sites owned by Aquarius Platinum may return to work tonight, allowing the group to buck the downward trend and rise 8p to £15.67.
But Rio Tinto was lower after last week's takeover speculation, when rival BHP Billiton was said to be preparing a bid. Over the weekend there were reports Rio had hired Morgan Stanley to help with a bid defence, but with HSBC downgrading from overweight to neutral, Rio Tinto shares lost 127p to £35.25.
With copper and aluminium both lower, other miners also fell. Xstrata was 47p lower at £27.17, Antofagasta fell 16.25p to 536.5p while BHP lost 24p to £11.99. Kazakhmys was down 26p to £11.64 as it made a $260m offer for Canada's Eurasia Gold.
An opening rise on Wall Street helped ease some of the damage done by the miners, so by the close the FTSE 100 had come off its worst levels, and was down 10.2 points to 6555.5.
Media groups were in demand, however. Pearson, the Penguin book owner and publisher of the Financial Times, climbed 17.5p to 908p as UBS raised its rating from neutral to buy and lifted its price target from 875p to £10.50. "Significant merger and acquisition [activity] in recent weeks has set new valuation benchmarks for almost all of Pearson's assets but the share price has barely moved," said the bank, explaining the reasoning behind its target increase.
Later Pearson announced the $477m purchase of US online teaching business eCollege.
Reed Elsevier added 3p to 666p as analysts said Friday's $7.75bn sale by Thomson Corporation of its education assets to private equity had positive implications for the Anglo-Dutch publishing giant. "The successful [Thomson] transaction underlines the appetite for media assets and provides encouragement for our belief that Reed will achieve, in total, more than £2bn for the Harcourt [education] division," said Seymour Pierce.
Elsewhere Britvic added 16p to 371p after it agreed to buy the soft drinks business of Ireland's C&C Group for €249.2m. There has been revived speculation that private equity group Permira might be planning a £1bn offer, and traders said this latest deal by Britvic was not likely to put it off.
Morrison Supermarkets edged up 1.25p to 329p on hopes of a private equity bid, despite talk in the market that one possible predator, CVC, was not considering a bid.
Utilities were better after a positive annual meeting statement from British Gas owner Centrica, up 8.25p to 393.25p. Scottish & Southern Energy added 29p to £15.41 and United Utilities was 7.5p better at 763p.
Building materials group Hanson rose 20.54p to £10.57 on suggestions that potential bidder HeidelbergCement was about to formalise its offer.
But software group Misys fell 7.25p to 247.25p after Merrill Lynch downgraded its recommendation from buy to neutral.
On Aim Sheffield United football club dropped 27%, down 4.75p to 13.25p after the team was relegated from the Premiership yesterday. The market seems to give little chance to a successful legal challenge by the club against the Premier League for not deducting points from relegation rivals West Ham.
Futura Medical slumped 18p to 42.5p after GlaxoSmithKline abandoned plans to develop the company's MED2002 anti-impotence gel. House broker Canaccord Adams cut its price target from 121p to 88p. "We are reducing our rating from buy to hold until our confidence in the company's ability to roll out a commercial product is restored," it said.
And Central African Mining's troubles in the Democratic Republic of Congo continued to weigh on the shares, down another 3.5p to 47p.
Finally, Honeycombe Leisure, suspended at 9p, confirmed it is in reverse takeover talks with brewer Robert Cain & Son.