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Thursday, 14 August - 4pm update
The hot money was flowing out of the banks and back into the miners and oil explorers, which may account for most of today's unexpected stock market rally.
The FTSE 100 index saw an early lead pared back this afternoon by poor US inflation numbers, but it later regained its poise to sport a rise of 20.7 at 5469.3. Turnover was pitifully low.
Vodafone, 0.05 firmer at 139.95p, where more than 100 million shares usually change hands each day, saw fewer than 60 million traded by late afternoon.
This afternoon, Wall Street made a nervous start but the Dow managed to reduce the deficit to 10.8 at 11,522.1.
Only yesterday, Merrill Lynch warned clients that the recent rally in banks had been a case of too much, too soon. Clearly, investors have been taking heed. Among the losers, Barclays fell 6¼p to 345¼p after Cazenove downgraded the shares from outperform to in-line following last week's half-year results.
Barclays was the best-performing European bank in the sector during the past quarter, having risen 21%. But Cazenove thinks the shares are up with events and, with little good news on the horizon, may now be due for a period of consolidation. Other losers included Royal Bank of Scotland, down 3p at 226¾p and HBOS, off 7¼p at 299¾p.
Instead, investors were switching into an oversold mining sector. At one stage, miners made up seven of the top 10 performers among blue-chips, which may account for the surprise resilience of the Footsie 100. Oil and mining companies account for more than 30% of the total value of the index.
Chilean copper miner Antofagasta led the way with a rise of 22½p to 560½p, followed by bid target Rio Tinto, up 146p at 4804p, BHP Billiton, 66p better at 1578p and Xstrata up 97p at 3061p.
Firmer crude prices also attracted support for the explorers. Cairn Energy, with big reserves in Rajasthan, jumped 75p to 2712p, while BG Group added 41p to 1112p and Royal Dutch Shell improved 22p to 1787p. Tullow Oil also attracted buyers, with the price gaining 14p at 710p.
Protherics continued to attract speculative support with the price climbing 12¼p to 50½p. The biotech company, which specialises in critical care and cancer products, says it has received several bid approaches. The speculators say AstraZeneca and Nycomed are likely suitors. AstraZeneca already has a joint venture with Protherics, which is valued at £175 million.
Housebuilders came under the hammer again after Bellway reported that the number of buyers putting a downpayment on one of its homes had almost halved. The news from Bellway painted an even gloomier picture of the housing market and underlined why its own share price has slumped 75% since April last year. Its price shed 24½p to 552p. Falls were also recorded in Barratt Developments, 15p at 120½p, Bovis Homes, 12¾p to 411¾p, Persimmon 19½p to 3391/4p and Taylor Wimpey 6p to 47¾p.
UBS has raised JKX Oil & Gas, up 33¼p at 389½p, from neutral to buy, but has cut its target from 590p to 523p. The shares have fallen 30% from the recent high in June of 543p, underperforming the UK exploration and production sector by 5% during the period. This share price weakness gives rise to a compelling valuation and an attractive entry point to what UBS considers one of the sector's most interesting stories in terms of its scope for improvement during the remainder of the year.
Semiconductor specialist Cyan Holdings plans to raise £3 million by placing 300 million shares. The proceeds will be used for general working capital requirements. Trading remains in line with expectations and Cyan, down 0.37p at 1.37p, is confident of improvements in turnover, which will spill over into profitability during the course of the next 12 months.
