Morning:
8°c
Thursday, 7 August - 4pm update
The world's largest medical research charity, The Wellcome Trust, has emerged as the mystery stakebuilder in shares of Marks & Spencer, down 5p at 279p.
The word in the Square Mile claims Wellcome has acquired 39.4 million shares, worth almost £110 million, in M&S, or 2.5% of the company — just under the mandatory disclosable level. Earlier this week, the shares spiked on talk of stakebuilding by the French supermarket chain Carrefour, or billionaire investor Warren Buffett. Several years ago M&S rejected an offer worth 400p a share (£8 billion) from billionaire retailer Sir Philip Green.
Bid target Lonmin rose a further 26p to 3452p after telling shareholders to reject the unsolicited offer of 3300p a share from Xstrata. That may come as sweet music to the speculators, who have already decided the Anglo-Swiss mining company will have to cough up more cash if it wants Lonmin, but some institutions are taking a different view of the outcome.
Word is, some of Lonmin's big institutional shareholders were dribbling out stock into the market place this morning, happy to take a nice return on their investment. Some have even been prepared to accept the offer from Xstrata outright. One dealer commented: “Xstrata's offer is all cash and in these markets cash remains king.”
Meanwhile, Xstrata, down 20p at 3148p, has bought a further 4.1 million shares in Lonmin, stretching its stake to 10.7%. Lonmin, the world's third-largest platinum producer, described Xstrata's offer as “wholly inadequate” and opportunistic.
Morgan Stanley says a successful acquisition of Lonmin would take Xstrata into the big league of platinum producers. It continues to rate Xstrata at overweight and says it remains the growth company among the bigger mining companies with a pipeline of inorganic growth options and opportunistic acquisitions providing wide-ranging choices for the future. ING reckons Xstrata will have to pay at least 3500p a share to win Lonmin.
Mining shares continued to underpin the rest of the market despite a recent softening of some commodity prices. Eurasian Natural Resources put on 85p at 1102p, Antofagasta 25p at 567½p and Ferrexpo 8½p to 275¼p. Shares traded within a narrow range for much of the session. The Bank of England monetary policy committee's decision to peg interest rates at 5% had been widely discounted. The FTSE 100 saw its lead reduced to 6.1 at 5492.2 following opening falls on Wall Street this afternoon on the back of a surprise rise in jobless claims. The Dow lost 99 points to 11,557.1.
Interim results from Barclays were given the thumbs up and the price rose 9¼p to 378¼p. There was also general satisfaction about Smith & Nephew's results and it put on 28p at 595½p.
Collins Stewart points out that with the oil price having recently traded below $120 a barrel the airline stocks have found scope for a rally. EasyJet, down 8¼p at 337¾p, has bounced 42% off its low of 244½p, while in contrast, Ryanair, 25 cents cheaper at €2.57, is only 12% off its low of €2.22.
“With both carriers operating similar business models and with similar customer bases, this is an interesting disparity and whilst we are fundamentally cautious on both stocks, we think long of Ryanair and short of easyJet could be a profitable pair,” says analyst Andrew Fitchie at Collins Stewart.
Struggling stores group Woolworths rallied 0.79p to 6.75p after learning that property developer Ardeshir Naghshineh had taken advantage of the recent weakness in the shares to raise his holding and average out any losses he may be saddled with. He now owns 141.3 million shares, or 9.6% of the company.
ITV rallied a meagre 0.3p to 43.9p in the wake of yesterday's dreadful profits decline and write-offs.
