FTSE in-depth: Miners digging hole for Footsie
Life has rarely been boring at African Barrick Gold – one of the new boys in the Footsie playground – since its £2.4bn float back in March 2010.
The gold miner's Tanzanian operations were beset by production problems last year. Persistent power cuts – par for the course in sub-Saharan Africa – and 'systematic' half-inching of fuel conspired to take a chunk out of output.
Still, all of that matters little when the price of gold is scaling new heights all the time. Annual figures released earlier this week showed a near doubling of pre-tax profits.
Now ABG's name is being mentioned around the water cooler – or more likely the Champagne bar – as a bid target, helping it to the front of the blue-chip pack, up 21p to 571.5p. Moreover, the stock looks undervalued if the problems at its Buzwagi mine are a thing of the past.
AngloGold Ashanti is the prospective suitor according to comments from one trader, although even he admitted the talk was 'very vague', so this one needs to be handled with care.
The prevailing mood in the City though was soporific even before lunch, as caution ruled the day. Spreading civil unrest in the Middle East and monetary tightening in China put pressure on natural resources stocks. Anglo American suffered most, down 68.5p to 3227p despite surging profits as fears that China's appetite for raw materials could be on the wane.
A modest dividend didn't do much to help Anglo, but it was far from alone among miners licking their wounds, with BHP Billiton down 53.5p to 2391.00p and Rio Tinto losing 101.5p to finish at 4397.00p.
When the miners sneeze, the Footsie catches a cold and with anticipation of this weekend's G20 bunfight doing little to encourage much activity, a sluggish trading session saw the Footsie limp down 4.39 to 6082.99. The Dow Jones was up 14.04 points in early trading to reach 12,332.18 by midday.
Graphics chip maker Imagination Technologies provided most of the excitement on offer, leading the Footsie mid-caps with an 8pc gain, up 33.4p to 429.7p. A target price hike from JP Morgan did the trick, with analysts predicting further contract wins for the firm's brand spanking new 'Rogue' processor. The chip is suitable for the exploding smartphone market. Great fun, those exploding smartphones.
'Come on in, the water's lovely,' cried Goldman Sachs, with a bullish note on Northumbrian Water.
The investment bank's analysts like the sector as a whole and see Northumbrian as the cheapest in its peer group, with upside potential of some 28%. The recommendation added 11p to the stock, which closed at 326.10p.
Transport group Go-Ahead's call for any more fares has been answered with a resounding 'Yes', judging by the increase in passenger numbers on its buses. Outgoing boss Keith Ludemans raised forecasts for the year and watched the stock climb 92p to 1408p.
Back to political upheaval in the Middle East for a moment, and miner Centamin Egypt has been largely unruffled. Until now, that is. Workers at one of its mines are staging a sit-in and hunger strike, demanding that the Australian firm hand the mine over to Egyptian owners.
The surprise incident knocked more than 12pc off the stock, down 17.2p at 122.20p.
Tools and equipment firm Charter International shed 53.5p to finish at 734.5p, as it warned that high steel prices and weakness in Europe were hitting margins at its core division ESAB. Analysts at Brewin Dolphin put their 'Add' rating under review, despite management's expectations that their market will iron itself out.
Banks were also under pressure despite Barclays, down 4p to 329.5p, having got the results season off to a flier for the lenders. Royal Bank of Scotland reports next week but banking guru Ian Gordon of Exane BNP Paribas has advised getting out while the going's (relatively) good, following the stock's recent rally. RBS fell 0.47p to 48.5p.
Domino's Pizza boss Christopher Moore handed himself a huge slice of the company's recent success, offloading shares worth £4m, contributing to a 14p fall to 500.00p.
Finally, stockbroker Charles Stanley has put out its list of mid-cap stocks to watch in the next 12 months. Top picks include support services firm Carillion (up 2p to 399.20p), Petra Diamonds (unchanged at 175.00p), Shanks Group (down 0.8p to 115.90p) and Synergy Health (down 16.5p to 878.5p).
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