Yesterday's trading: Traders on hunt in 'silly season'

By Geoff Foster for MailOnline
Updated: 03:50 EDT, 21 August 2009

It's arrived. The summer 'silly season' for market movements and already the smell of burnt fingers is wafting around the City.

Geoff Foster: With dealers distracted by the Ashes, over-excited punters got carried away

With many dealers distracted by the Ashes cricket crunch at the Oval, over-excited punters got carried away chasing shares of Amur Minerals over 400% higher.

It followed the company's announcement of a new $1.8bn reserve estimate for its Maly Krumkon deposit, part of its flagship Kun-Manie nickel project in Russia.

It said the in-ground reserve value of Maly Krumkon is $6.9bn and production from the Kun-Manie deposits is expected to start in 2012.

From an overnight close of 3.13p, the shares rocketed to 15¼p before closing 10.45p, or 373%, higher at 13¼p on turnover of 4.9m.

Looking on in total disbelief was Peter Rose, mining guru at Fox Davies Capital. He said: 'The shares are overpriced. The site is in a very remote part of Russia, some 300 miles from a railway. The region has permafrost and the deposits are low grade, about 0.63% nickel and 0.18% copper. A large processing plant will have to be built which will cost a lot of money. Amur will have to raise several hundreds of millions of pounds.'

Back to reality, the fabulous Footsie raced 66,91 points ahead to 4,756.58 and the FTSE 250 jumped 161.11 points to 8,531.36 after China's Shanghai Composite index rallied 4.5% overnight for its second-biggest gain of 2009. Wall Street weighed in with a gain of 70.89 points following economic data which did not disappoint.

As reported in the latest Merrill Lynch survey, fund managers are bullish and have begun putting shedloads of cash back into the market. One leading hedge fund boss said yesterday: 'The final quarter could be a humdinger.

The Footsie will leave the 5,000 level behind as investors chase all those heavyweight stocks like Vodafone which have not contributed to the impressive recovery since the March low, sharply higher. The Footsie yields 4.5%, gilts 3½p and savings rates are naff. Where else is there to put your money?'

Almost on cue, mobile phone giant Vodafone buzzed 2.9p higher to 131.4p. Broker Bernstein moved to outperform and has a target price of 180p. It believes the disappointments of wireless cyclicality in general and Vodafone's performance in particular have now brought expectations to an unrealistic low. The stock is currently trading for terminal decline rather than cyclicality which is really afflicting the business, and that this makes little sense.

Sir Martin Sorrell's advertising empire WPP advanced 34.4p to 507p on hopes that next Wednesday's interim results cut the mustard. Investec is a fan, believing the group is a good macro recovery play.

Credit Suisse reckons Barclays (3.9p up at 348.95p) is the best of the bunch and has a 12-month target price of 385p, up from 295p. The broker believes a prolonged low interest rate environment, which seems increasingly likely, would hurt others more than Barclays.

Rumours of an imminent £500m-plus rights issue from Barratt Developments refused to lie down as shares of the housebuilder erected a further gain of 20.8p at 240.9p. Rival Taylor Wimpey put on 3.2p to 45.95p on growing hopes that the UK housing market is on the way up.

News of another significant contract win lifted construction group Carillion 9.9p to 294.3p. It has signed a letter of intent with Openreach, BT's local access network business, for a support services contract worth £1bn.

Non-life insurer Novae rose 25.8p to 305&rac12;p after forming a new international reinsurance unit which will offer specialist class products.

Renewed takeover hopes a day after the team secured its first win in the Premiership, shares of Birmingham City scored a gain of 16p to 64½p. Hong Kong business Carson Yeung, whose Groundtop business owns 13.7% of the equity, has apparently out down a 'deposit' on a £1 a share cash offer which values the club at £81.5m.

Evidence that new boss Geraint Anderson's strategic review announced earlier this year and is already yielding benefits, with the group trading profitably since May, helped TT Electronics spark 8¼p higher to 48p. Shop broker has a target price of 78p and has upgraded earnings forecasts for next year given cost savings still to come.

Northern Petroleum gushed 5½p to 131p on a Matrix recommendation and target price of 221p. The broker says the combination of near-term production growth and longer term exploration upside that could potentially transform the company makes Northern an attractive investment.