Miners came to the rescue of a nervous market today.
BHP Billiton rose 94p to £17.50 as the company said it planned to give an update on its reserves this week. Traders took this to mean an update in a good way, and their confidence was underpinned by a report saying its Olympic Dam mine in South Australia could potentially be the largest gold resource in the world.
The report in the Melbourne HeraldSun newspaper about the mine, which has copper and uranium reserves as well as gold deposits, was timely as gold neared a new 28year peak. The continuing dollar weakness means it is cheaper for other currency holders to invest in the metal.
Hopes of continuing demand pushed up other commodity prices, and by extension other miners.
So Rio Tinto rose 155p to £42.04 while Antofagasta added 52.5p to 843p and Xstrata climbed 145p to £32.89.
Midcap miners also benefited, with Randgold Resources ahead 4p to £15.25 and Aquarius Platinum adding 114p to £18.53p. Lower down the market Anglo Asian Mining rose 5.37p to 13p on news it can increase production at its gold and copper prospect in Azerbaijan after receiving a loan facility from the country's International Bank.
Back among the big boys, Marks & Spencer moved 25p higher to 592p after a positive note from Deutsche Bank, which set an 815p price target.
Labelling the company its top pick in the general retailing sector, Deutsche said: "M&S's shares have underperformed the market by 20% over the last four months due to concerns that a slowing UK consumer will hurt the business, and that the recovery has lost momentum.
"We believe the second half will prove a positive surprise and that profits growth will reaccelerate. M&S has strong defensive merits and more importantly the profit boost from the massive store modernisation program is only just starting. We would buy now before news of improving autumn trading and before a possible large share repurchase program.
"The company has publicly indicated that it is likely to start buying back shares within the next two years. We believe it could do so in the next few months - a £2bn buyback would enhance 2008/9 earnings per share by 10%."
But troubled Northern Rock put in what could only be described as a volatile performance. It ended 22.3p lower at 172p having fallen as low as 163p and risen as high at 221.5p. There was nervousness about whether a takeover bid would ever happen, with some reports suggesting hedge funds are circling the stricken mortgage bank. If it falls into their hands, there seems little chance ordinary investors will be left with anything.
The cautious mood dragged down Alliance & Leicester too, 21p lower at 716p.
Overall, thought, the FTSE 100 ended 9.2 points higher at 6465.9, mainly due to the miners.
Among the other risers, engineering and medical equipment group Smiths added 23p to £10.50. Reports over the weekend suggested chief executive Keith ButlerWheelhouse might announce his departure on Wednesday, which led analysts to suggest the group could then face a breakup bid.
"A change at the top of Smiths should herald a strategic review and a logical conclusion would be further disposals or a breakup," said Harry Philips of Evolution Securities. "We believe there would be plenty of potential buyers both trade and financial for all of the units. Our view is that the stock is cheap, and the breakup debate and any subsequent execution represents icing on the cake."
Analysts at Citi gave an 80% chance to a breakup and set a £12.18 target in that case, while Credit Suisse restarted coverage of the company with an outperform rating and target price of £11.60.
Heading the other way was building materials group Wolseley, down 41p to 807.5p as it revealed the full effects of the slowdown in the US housing market on its results.
UK housebuilders were also weaker on fears of a slowdown in the sector, with Taylor Wimpey losing 16.75p to 271p.
Insurance group Benfield fell 3p to 270p as Numis cut its recommendation from add to reduce. It slashed its 2008 earnings forecast by 14% and added: "Previous positives such as a potential takeout and share buy backs now appear to offer less support. As such we believe the shares will underperform and suggest that shareholders reduce exposure."
Elsewhere property minnow Erinaceous, which recently said takeover talks had fallen through, lost 51p to 57.75p as confirmed it was in talks with its lenders about certain breaches of covenants in its credit agreement. It also hinted its results, due tomorrow, may be delayed.
Over at Sports Direct, Mike Ashley's company added 2.5p to 123.5p despite Pali International cutting its price target to 100p and repeating its sell recommendation.
Analyst Nick Bubb said: "Note that over 40% of Sports Direct's market capitalisation of £792m is now represented by its various listed investments, which can, of course, go down as well as up.
"Clearly Sports Direct has very low earnings quality and visibility and also increasing financial risk, with yearend gearing likely to be over 100%, so we have cut our price target, in two steps, from 125p to 100p."
Computer games producer SCi Entertainment rose 31.5p to 381.25p on hopes that several rivals were battling it out to buy the company.
Traders believe Ubisoft made the initial approach announced by SCi on September 4, with Time Warner and Electronic Arts said to be the other interested parties.
Property business Speymill jumped 7p to 112.5p on news of a return to the black, with half year profits of £1.41m compared with a £240,000 loss. And marketing group Adventis added 3.5p to 55.5p after interim profits rose by 57%.
Finally hedge fund Absolute Capital Management added 4.5p to 55p. The company's shares plunged last week on news that cofounder Florian Homm had resigned, which was followed by news it was suspending redemptions in some of its funds. Homm pointed out in his resignation letter he remained the largest single shareholder in the company and he would "continue to fight for shareholder value". But he must have changed his mind about the first part at least, since on Friday he sold 10m shares at 32.5p each to Andreas Rialas, Homm's cochief investment officer. This represents 14.5% of Absolute and cuts Homm's stake to 4.8% while lifting Rialas' to 19.6%.
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