Market report: Friday close

By Sarah Marks for MailOnline
Updated: 12:59 EDT, 14 December 2007

Any chances of an end-of-week rally following yesterday's panic-selling were crushed by a damning downgrade on the mining sector that scared off all but the most intrepid buyers.

Vedanta Resources plunged 30p to 2109p as Goldman Sachs homed in on its weaknesses in a major review on the whole industry. Crowning it the 'least attractive stock' in its coverage, it slashed its target to 2240p from 2545p and told clients to sell.

Goldman argues the Agarwal family's 54% stake in Vedanta makes it highly unlikely it will be involved in industry consolidation. It also believes recent guesses on the value of its energy business are way above the mark. Market rumours say a flotation of subsidiary Sterlite Industries' energy unit could raise $2bn (£987m).

More generally, worrying reports from China, Europe and America point to weaker global growth in 2008, and Goldmanhas significantly cut its price forecasts for base metals. This feeds through into weaker earnings and price targets for all the major miners, and has triggered a sector downgrade to neutral from attractive.

Anglo American was down 108p at 3072p, while Antofagasta fell 31½p to 702½p. Kazakhmys fell 6p to 1310p and Rio Tinto lost 118p to 5176p. Even Xstrata, Goldmans' favourite, was 7p down at 3597p. It remains on the bank's conviction buy list.

Despite that, the FTSE 100 was 48 points up at 6412.2.

Utilities were the obvious choice for risk-averse investors, with National Grid up 21½p at 842p, Severn Trent 28p ahead at 1528p and United Utilities rising 8p to 764½p.

While bid gossip kept Northern Rock at the top of the Footsie climbers, up 5.9p at 91.9p, little else offered encouragement. HBOS was badly hit after Citigroup put the boot in. The broker said its long-term savings franchise is 'no longer enough to support a buy rating, given the significant headwinds facing the UK retail and corporate divisions'.

HBOS fell 8½p to 756p as Citi shunted it to hold from buy, and warned that it reckons earnings next year will be around 6% lower than in 2007.

Biscuit-baker Northern Foods delivered an early Christmas present to shareholders with news of a buyback programme that will see it purchase up to 5% of its own stock. Northern, up 7½p at 91p, said it was still on the lookout for acquisitions but was committed to returning excess capital to shareholders.

Aircraft services group BBA rose 2¼p to 197p after declaring robust trading over the past year and predicting organic growth of 8%. This compares favourably with 3% in 2006, and indicates the recent economic uncertainty has not dented business.

Online media group UBM jumped 10p to 589½p after revealing that revenue growth had accelerated in the second half. Echoing positive advertising figures from Trinity Mirror, up a further 3p at 345p, UBM said November had been the most profitable month of trading in the last five years.

A slowdown in the housing market is likely to hit insulation and roofing products supplier SIG. Citigroup has slashed 280p from its target, putting its long-term forecast at 915p to reflect what it believes will be a more challenging year in 2008. For the shares to rally, investors will need to see more certainty about future trading conditions, it adds.

Engineering group GKN was up 9¼p at 294½p on news that ABN Amro was starting coverage with a buy rating and 350p target.