Market report: Tuesday close

By Mickey Clark for MailOnline
Updated: 12:05 EDT, 13 November 2007

Recent bid speculation targeting Anglo-Swiss mining giant Xstrata and Anglo American appeared to boil over today with shares of both companies losing ground.

But Credit Suisse urged clients not to be too quick to rule out the possibility of further consolidation in the sector. The broker said that after last week's £50bn offer for Rio Tinto, down 268p at 5390p, by BHP Billiton, 16p cheaper at 1591p, speculators appear to be discounting the prospect of a tieup between Anglo, off 90p at 3239p, and Xstrata, down 66p at 3250p.

Credit Suisse remains convinced both companies have attractions for each other. Were Anglo to offer 4200p a share for Xstrata, half in shares and half in cash, it reckons the deal would be 18% earningsaccretive with synergies worth $1.5bn (£723m). Conversely, it says, if Xstrata offered 4200p a share for Anglo on the same terms, that deal would boost Xstrata's earning by 5%.

Mining shares were lower on the back of a rallying dollar, which has undermined the value of commodities such as copper, gold and zinc. Lonmin fell 78p to 3077p but Antofagasta was up 3p to 703p. Vedanta lost 49p to 1887p despite Goldman raising its rating from sell to neutral and its target from 2135p to 2530p. Xstrata is also on its conviction buy list with a 4500p target. Meanwhile, City speculators say they would never rule out the possibility of a defensive Rio Tinto bid for Anglo.

Investors generally had another nervous session. Prices ticked better this afternoon ahead of the start of trading on Wall Street, where investors were trying to bring to an end four consecutive days of losses. The Dow rallied 121.40 points to 13,108.90. The FTSE 100 index rose 26.70 to 6,364.6 as sentiment was cheered by first-half results from Vodafone, up 13.7p at 195.7p.

Banks continue to be squeezed higher as the bears attempted to unwind short positions. Barclays rallied 14p to 527p, having hit a three-year low of 474½p on Monday after a credit-crunch-related sell-off. The shares ended last month on 593p, and their best of the year so far has been 790p. Royal Bank of Scotland rose 18p to 457¾p and Lloyds TSB put on 10p at 497½p.

Bear Stearns has lifted Smith & Nephew, down 8p at 579p, from peer perform to outperform to reflect the positive effect of product initiatives, acquisitions and earnings improvement.

It says the new management team has embarked on a series of initiatives aimed at driving better results and creating value over the next several years. The company's trading profit lags its larger orthopaedic peers by 10 percentage points or more.

Gaming services provider Playtech fell 11p to 374p after chief operating officer Rafi Ashkenazi cut his stake to 316,668 shares. He exercised options and sold 66,666 shares at 380p.

Vaccines maker Acambis, up 5¼p at 123p, has agreed a collaboration deal worth up to $70m with Sanofi Pasteur to develop Acambis's ChimeriVax West Nile virus vaccine. Acambis will receive $10m this year, while milestone payments linked to product approval and US sales will push the deal's value up to $70m. The vaccine is in phase two trials.

Broker Oriel has raised next year's profit forecasts on Lavendon by 16% to £26m. Lavendon, which hires powered gear to builders, today spent e87m (£61m) on a business operating in Spain, France and Belgium. The shares rose 10p to 630p.

TOMORROW'S AGENDA

• All eyes will be on HSBC as it presents its US business's third-quarter results. Europe's biggest bank by market value is expected to reveal another massive hit from its exposure to the American subprime industry, with estimates suggesting the writedown will be over $1bn (£485m). The figures come nine months after its US division became the first high-profile victim of the mortgage meltdown, and will add to fears that the effects of the housing crisis are far from over. Boss Stephen Green's woes are expected to continue far into next year.

• Following the collapse of the Qatar-backed Delta Two takeover, J Sainsbury unveils first-half results. The numbers should provide some comfort to investors, who have seen their shares plummet since the deal fell through. Last month's trading update suggested that like-for-like sales will rise by about 4%, sending pre-tax profits up to £240m. representing a sharp rise on the same period last year. Analysts believe the supermarkets giant is profiting from growing demand for organic produce and climbing non-food sales.

• Fashion house Burberry publishes interim results, with the City looking to see if the luxury goods market has escaped the gloom enveloping the retail sector. Chief executive Angela Ahrendts, who has diversified the label since her appointment two years ago, is likely to have every reason to remain upbeat. Famed for its raincoats and its black, beige and red check, the luxury goods company is expected to remain almost unscathed from the consumer slowdown following a solid trading update last month. Accessory sales have been a major driver of growth in recent years, with its handbags in particular being snapped up by fashionistas.