Market report: Thursday close
Sky-high metal prices and talk that BHP Billiton is preparing an audacious takeover bid for Rio Tinto fuelled frenzied interest in the mining sector today, sending shares soaring.
The price of gold futures hit a 28-year high of $747.90 an ounce while copper and platinum were also strong. Traders reckon global demand for metals such as copper will not be damaged by the slowdown in the US economy, making mining stocks a good bet.
Also exciting investors was renewed talk that BHP, the world's biggest miner, is considering a bid for rival Rio Tinto, the world's third-largest with a market value of about £45bn.
The story goes that if BHP is to make a move, it will have to do so before 23 October when Rio's $38.1bn (£18.7bn) offer for Montreal-based Alcan closes. Said one trader: 'We are getting very close to that deal being finalised, which is stoking the BHP-Rio rumours. If BHP is going to do it, they will want to before then.'
Rio surged 155p, over 3%, to 4563p while BHP was up 79p to 1880p. Elsewhere in the sector, Antofagasta jumped 35p to 871½p and Xstrata was 137p higher at 3592p.
The miners' upward charge powered the FTSE 100 index through the 6700 threshold to be up 91.5 points at 6724.5. It is now in touching distance of its year high of 6732, reached in June. In New York this afternoon, the Dow Jones Average was up 78.90 at 14,157.60.
It was a grim day for housebuilders after a downbeat report on the housing market by the Royal Institution of Chartered Surveyors. It said house prices across Britain tumbled last month at the fastest rate for two years, and pointed to further weakness in the months ahead.
Investors ran for cover, sending shares in Barratt Developments down 26½p to 722p while Persimmon was off 42p at 1003p and Taylor Wimpey fell 13p to 290¾p. Mid-cap builders also suffered, with Bellway 32p lower at 1076p, Redrow off 17½p to 388½p and Bovis Homes 18p down at 684p.
Carphone Warehouse slid 1½p to 350½p despite a vote of confidence by UBS. The broker upgraded Carphone from neutral to buy and set a price target of 400p. It followed a bullish statement yesterday by Carphone boss Charles Dunstone, who said he was 'confident of the full-year outlook'.
Experian did not enjoy the same response to its latest update, however, as Credit Suisse and Citigroup downgraded their ratings on the stock. Investors jumped ship yesterday after the company revealed the extent of its exposure to the subprime mortgage market in America, sending shares in the credit-checking firm tumbling 7%. But the group finished up 3½p to 508½p despite Citigroup cutting its price target to 560p and Credit Suisse to 580p.
French games group Ubisoft today decided not to launch a bid for SCi Entertainment, sending its shares plummeting 25¼p to 394½p. The stock soared last month on takeover talk but Ubisoft today said it had 'no intention' of making an offer.
Debenhams ticked 1¾p higher to 111p after Morgan Stanley raised it from underweight to equalweight, saying current trading is 'OK' and its valuation looks 'reasonable'.
ITV gained just 0.2p to 104.5p despite the prospect of a bumper weekend for advertising revenues. Analysts say ad revenues could be £2.5m during the Rugby World Cup semi-final between England and France, as opposed to £1m if the match had been between Australia and New Zealand.
TOMORROW'S AGENDA:
• General Electric is among the first of the Dow-listed companies to release results as the US gears up for the third-quarter earnings season. The technology conglomerate is expected to post a profits rise despite warning last month that it would take a big hit from leaving the ailing subprime lending market. Burger chain McDonald's announces its September figures. Sales jumped in August, boosted by a growing share in the high-margin US coffee market. Analysts expect sales to continue to soar as climbing food prices force customers to switch to cheaper eateries.
• Gloucester-based metrology company Renishaw issues a trading statement. Profits fell to £30m last year as it was hit by a weakening dollar, and an export ban given to one of its main customers took a chunk out of sales. The firm is likely to see something of a recovery as it starts to solve the problems that have been dogging it recently.
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