Market report: Thursday close

By Mickey Clark for MailOnline
Updated:

 

Shareholders of Royal Bank of Scotland have until tomorrow to decide whether to take up the group's £12bn rights issue.

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The shares this afternoon rallied a further 9½p to 259p, against the rights issue price of 200p. Whispers in the Square Mile are that a staggering 95% of the issue has been taken up.

If that is the case, the underwriters will have little trouble placing the remaining 5%. The share price slumped to a low of 219p earlier this week amid claims that up to 30% of the new shares would be left with the underwriters.

Success with the RBS rights would also bode well for HBOS, up 17½p at 358p. Its £4bn cash call has been priced at 275p. Bradford & Bingley scaled back the terms of its rights earlier this week after another profits warning. The shares rallied 4½p to 73¼p.

Billionaire financier George Soros' warning that the boom in commodity prices could turn out to be a 'super bubble' may have dire consequences for the London stock market.

Demand for raw materials by developing superpowers such as China and India has driven up the price of commodities such as copper, zinc, gold, oil and coal to record levels. It has been good news for oil companies such as BP and Royal Dutch Shell, and miners in the shape of Rio Tinto, BHP Billiton and Anglo American. All are constituents of the FTSE 100 index, and may be keeping it artificially high.

Companies in the banking, retail and drugs sectors have seen their stock market values halve since the start of the credit crunch and global economic slowdown. But, boosted by at least 15 oil and mining companies, the performance of our top 100 companies combined has turned out to be exceptional.

The Footsie is down just 10% year-on-year because it is now heavily weighted towards firms that benefit from pricier oil and commodities. Critics says the index no longer offers any meaningful reflection of the UK economy, or even the global economy.

Financial information website Digital Look calculates that commodity and oil stocks now account for 36% of the Footsie, compared with 25.5% just a year ago. The total market capitalisation of companies quoted during that time has dropped from £1.65 trillion to £1.48 trillion, but the value of the commodity-related stocks has grown from £422.9bn to £533.5bn.

There were signs today that investors were taking heed of Soros' comments, with mining shares continuing to lose ground. Lonmin was down 104p at 3350p, BHP Billiton, 22p at 1878p and Kazakhmys 45p to 1625p. That left the rest of the market trading within a narrow range.

The FTSE 100 recouped an early loss to close 25.2 points higher at 5995.3. This afternoon Wall Street moved to claw back three consecutive days of losses with the Dow rising 113.1 to 12,503.6.

Posh people's cooker maker Aga Rangemaster dipped to 276p after HSBC sold six million shares. Could the buyer be Edmund Truell's Duke Street Capital, which already owns 28.87m, or 42% of the company? Panmure Gordon has cut its rating on the shares from hold to sell, blaming the falling number of houses being bought and sold and higher energy costs.

Road haulier Wincanton was rewarded with a rise of 9¼p to 305p after last year raising pre-tax profits from £32.6m to £36.7m. The company says rising fuel costs are having little impact on profits because they are being passed on to customers on long-term contracts.

Bumper full-year profits and bullish comments about the outcome for the current year lifted Synergy Healthcare 36½p to 715p.

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TOMORROW'S AGENDA

• Fuller Smith & Turner is tipped to defy the pub-sector gloom with its full-year results. The London Pride brewer is expected to report a rise in pre-tax profits from £22.1m last year to £22.9m and like-for-like sales up just under 4% on strong accommodation and food sales. Although market conditions are worsening, analysts believe Fuller will prove more resilient than its peers.

• Model train maker and Scalextric owner Hornby delivers full-year figures with analysts forecasting pre-tax profits of about £8.8m. Delays in shipments from China affected its European performance while UK sales been hit by the spending slowdown.

• Jeweller Signet, which owns the H Samuel and Ernest Jones chains, is forecast to report a 21% drop in first-quarter profits to £20.5m. Its US operations are struggling, and soaring gold prices are eating into margins.

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