FTSE in-depth: Chinese rev up sales at Matthey

By Tamsin Brown
Updated: 04:51 EDT, 15 October 2010

Britiain's car market may have gone into reverse but earnings at catalytic converter maker Johnson Matthey are still poised to accelerate thanks to a roaring precious metals market, burgeoning demand from China for new cars and a recovery in other markets.

Playing safe: Investors locked in some of their recent profits and the FTSE 100 failed to hang to early gains.

The Chinese car market revved up 53% in 2009.

Growth has since slowed but analysts at Royal Bank of Scotland still expect car sales in China to grow by a further 18% in 2010.

According to the bank, the North American and Japanese car markets are also on track to have a good year and together with China they will more than counter the declines in Europe where car registrations are already down 2.8% this year.

In fact RBS analyst Pieter Zwinkels predicts that the catalyst market will grow a healthy 15% this year as governments introduce new legislation reducing limits on nitrogen and oxides exhaust and truck sales recover.

Johnson Matthey is also in a sweet spot with its platinum business as it rides the coattails of strong metal prices.

Zwinkels thinks the strong platinum price will continue to head north over the next couple of years. He told investors to buy shares in the platinum and catalytic converter specialist and has lifted his price target on Johnson Matthey to £20 from £18.

Shares in Johnson Matthey were among the best performers, up 50p at 1892p. It shared the risers' board with a host of companies who were chased for their exposure to the rampant commodity market.

Gold hit an all-time high and silver rose to a 30 year record as selling pressure on the greenback continued.

Mexican silver producer Fresnillo was up 29p at 1311p, Rio Tinto and Antofagasta were up 62p at 4100p and 26.5p at 1327.5p, respectively.

But investors locked in some of their recent profits and the FTSE 100 failed to hang to early gains. The benchmark closed down 20.14 points at 5727.21.

Richard Hunter, head of UK equities at Hargreaves Lansdown, said: 'We had a couple of strong days. There has been some pause for breath. There's been a bit of profit taking.'

Across the pond, the Dow Jones Industrial Average dropped 36.21 points to 11,059.87, after some disappointing data on the US jobs market. Back on this side of the Atlantic, investors gave UK banks a hard time again amid speculation that they would follow the lead of Standard Chartered and tap the market for funding.

But highly-regarded Credit Suisse analyst Jonathan Pierce believes fears of a rash of rights issues are overdone. He thinks that none of the UK banks need to raise equity.

The banking sector's falls gathered pace after Wall Street opened where US financials were under the cosh amid worries over an investigation of the mortgage industry by attorney generals from all 50 US states.

Barclays finished the session down 129p at 280p, Royal Bank of Scotland fell 2.23p to 45.3p while Lloyds Banking Group shed 2.13p to 70.49p.

Back among the risers mobile phone giant Vodafone rung up gains of 2.6p to 166.5p helped by a bullish buy note from Nomura.

Chip maker Arm Holdings climbed 5.9p to 388.2p in the wake of good news from its US peer Intel

Investors in EnCore Oil had a rollercoaster ride. Shares in the gas and oil exploration company plunged in early deals. Traders said that rumours had whipped around the market that a rig had been damaged. But the company revealed it had just been delayed by bad weather.

The Transocean Galaxy II rig is en-route to Dundee where it will wait for the right weather to take it to the Varadero location on block 28/9 in the North Sea. The shares recovered to close down just 4.5p at 120.75p.

Falkland oil explorer Rockhopper had another bad day. It shares fell a further 37p to 340.5p.

Shares in Advanced Power Components fell 1.5p to 13p after it revealed that an error meant its 2009 accounts included a £261,000 overstatement of its inventories. It said it would correct the mistake and there would be no impact on the results for the year ended August 31 2010 or going forward.

Online grocer Ocado hit a fresh low of 123.5p, down 3.5p. It is now trading 31% below its 180p listing price.

Speculation of a bid for Innovation Group gave it a lift, up a penny at 14p. There were whispers of a 17p to 19p bid coming for the company.