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Market report: Friday close

By Rosamund Urwin
Updated: 12:01 EDT, 8 August 2008

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Falling commodity prices may provide a tonic to those worried about inflation, but they came as a bitter pill for mining and oil companies today.

Rosamund Urwin: Latest share news

Rising global stockpiles and a rally in the dollar sent the price of copper sinking for the sixth week in a row and sparked a sell-off of the miners. Speculation abounded that some traders were also taking their profits after the recent boost provided by talk of further consolidation in the sector.

In fact, miners made up seven of the top 10 fallers in the Footsie, with Kazakhmys the biggest loser in the top flight. Its shares, which appeared to be closing in on the £20 mark back in May, plummeted 86p to 1248p. Meanwhile Antofagasta, the owner of copper mines in Chile, reversed much of this week's gains to trade down 27½p at 539p. Rivals were also given a kicking, with Vedanta 91p lower at 1765p and Xstrata off 154p at 2990p.

Meanwhile oil stocks largely came off the boil, with UK explorer Tullow down 35p to 706p and Cairn 102p cheaper at 2626p.

But there was better news from BG Group, which reported a discovery of light oil in Brazil's Santos Basin. The deep-ocean find protected its shares from retreating too far, losing only 16p to 1090p. Evolution estimated that between 500m to 1m barrels of black gold could be pumped out of the area, although the group did not give any information on the size of the discovery.

The find boosted mid-cap oil services group Wellstream Holdings, which put on 50p to 1103p. With its shares down 23% in the past month on weakening oil prices, BG's discovery came as a well-timed fillip as Wellstream's products will almost certainly be needed in the Santos Basin.

The FTSE 100 remained directionless, eventually sinking back into the red in thin trading. The benchmark index was up 11.7 points to 5489.2, as a strong showing from travel stocks was outweighed by losses from the heavyweight mining and oil sectors. This followed a dramatic fall on Wall Street overnight, with share prices reversing the gains of the past three sessions. The Dow managed to claw back some of those losses today, rising 76.9 points to 11,508.3.

It seems Arun Sarin may have timed his exit from Vodafone to perfection. The former chief executive handed over the reins to high-flying deputy Vittorio Colao last month, having presided over a boom period for the mobile phone giant. But Vodafone shares slid 0.95p today to 140.3p after it fell out of favour with Goldman Sachs. The City big-hitter, which cut the shares from neutral to buy but maintained its 175p target price, cautioned that Vodafone's first-quarter figures show weaker growth in Europe than expected and highlighted the Spanish business as particularly concerning. Goldman also warned that, amid fears that growth in developing world economies could grind to a halt, its emerging market exposure may prove less of a bonus now than it has in recent years.

Marks & Spencer, up 4p at 287p, may remain largely out of favour in the City, but Northern Foods, the supplier of its ready meals, found a fan today. Goldman advised its clients to snap up the stock, and hiked its price target from 72p to 75p despite the company facing soaring input costs. The broker cut earnings forecasts to reflect the tough pricing environment but says the shares still look cheap. The shares rose 4¾p to 60p news that Swiss luxury goods group Richemont and investment firm Remgro are planning to spin off a combined 27% stake in British American Tobacco proved anything but a lucky strike for the cigarette maker.

The move, which resulted in proposals for BaT to take a secondary listing in Johannesburg, ended months of bid speculation and sent its shares plunging 38p to 1838p, as some investors were doubtless encouraged to switch to rival imperial Tobacco. The slump came despite Charles Stanley reiterating its buy rating on the stock.

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Monday's Agenda

Fear that inflation is out of control will have sat heavily on rate-setters at the Bank of England when they decided to leave interest rates unchanged. Monetary Policy Committee members may have looked at June's factory gate inflation numbers - officially released today - to inform their decision.

Analysts predict the data, also known as producer prices, will show the price of goods leaving UK factories is still climbing.

Last month, the annual rate at which prices are rising hit double digits for the first time since records began as manufacturers, facing sharply rising bills, passed on price increases to customers.

Mapeley, the landlord to Her majesty's Revenue & Customs, posts results for the first six months of the year. Like all of its rivals, the company has been hit by the slowdown in the UK commercial property market and in march took a £148.6m writedown on the value of its estate.

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