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Wednesday, 6 August - 4pm update
The prospect of further consolidation within the bustling mining industry has again whetted the appetites of stock market investors.
It follows the move overnight by Xstrata to make an indicative £5 billion offer, worth 3300p a share, for platinum producer Lonmin, which subsequently cut a dash in the Square Mile with a leap in its share price of 1094p to 3413p.
Presumably, speculators feel this is an opening shot across the bows by Xstrata, which will eventually have to improve its terms. Xstrata says it has already bought an 8% stake in Lonmin as a stepping stone for its bid. Shares in the Anglo-Swiss miner fell 8p to 3192p.
It should be remembered that BHP Billiton, 45p dearer at 1559p, still has an all-share offer on the table for Rio Tinto, up 105p at 4855p, worth an estimated 5300p a share. Speculators despair. They say this deal has been running almost as long as The Mousetrap in London's West End and still shows few signs of being resolved.
Meanwhile, Kazakhmys, up 18p at 1308p, recently increased its stake in rival Eurasian Natural Resources, up 47p at 997p, by 98 million shares, raising its holding to 286 million shares, or 22% of the company. Dealers say the next step could be a full bid. Other miners going better included Anglo American, up 88p at 2782p, Vedanta Resources, 58p higher at 1832p, and Antofagasta, the Chilean copper miner, up 21p at 541p.
Shares generally traded in a narrow range for much of the day before posting modest gains this afternoon. The FTSE 100 index rose 23.9 to 5478.4. It was partly underpinned by that strong performance from the miners. Wall Street gave back some of yesterday's big gains this afternoon, the Dow losing 47.1 at 11,568.7. Troubled mortgage provider Freddie Mac has written down a further $2.5 billion on risky loans.
Marks & Spencer has come up from a low of 217p since the start of July, with the shares changing hands today 7¼p dearer at 287¼p on talk of stakebuilding. Gossips say US fund manager Brandes may be getting back into the shares, but this seems unlikely. Another story doing the rounds is that French supermarkets chain Carrefour has built up a stake in recent weeks, but remains under the 3% disclosable level.
Peel Hunt is unconvinced about talk of a bid for Punch Taverns, ¾p lighter at 344¼p, from the private-equity outfit CVC Partners. It points out the price has shot up 32% since Friday, bolstered by bid talk and bear closing. They look expensive, making a bid unlikely.
Morgan Stanley, one of the two lead underwriters of HBOS's recent £4 billion rights issue, has resumed coverage of the mortgage provider with an overweight rating and 430p target. The price slipped 5¾p to 330½p. The broker says worries about the business model have been overdone and believes the shares will move back towards book value.
Reports of a military coup in Mauritania could be bad news for those exploration companies with extensive interests in the north-western African state. These include BG Group, up 22p at 1072p, Roc Oil, down ½p at 58p, Premier, up 78p at 1233p and Dana Petroleum, 38p better at 1265p. All have minority stakes in a project run by Australia's Woodside Petroleum.
Morgan Stanley has downgraded Standard Chartered, down 1p at 1541p, from overweight to equalweight and slashed its target from 1920p to 1520p in the wake of yesterday's first-half numbers. Goldman Sachs has cut Standard from 1790p to 1740p and is sticking with its neutral rating.
UBS has downgraded DSG International, down 2½p at 50½p, from buy to neutral with its target tweaked 5p higher to 55p. The broker says it has downgraded the struggling electrical goods retailer because durables demand is still likely to suffer from weaker consumer confidence, the housing market and other pressures on disposable income.
