Morning:
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Afternoon update
There were red faces at stockbroker Liberum Capital this morning, after Xstrata, up 5p at 1721p, dropped its 3300p-a-share offer for rival Lonmin.
As a result, shares of Lonmin slumped 476p to 1798p, after briefly touching 1580p, making it the biggest faller among the top 100 companies. That prompted Michael Rawlinson, mining analyst at Liberum, to don his dunce's cap and stand in the corner.
He has had to apologise to clients who followed his advice and bought Lonmin shares during the past few days. They are now nursing some whopping losses. Lonmin's share price put in a late spurt after the close of business last night, climbing more than 200p, as the speculators piled in believing a deal was about to be concluded.
Rawlinson blames the bid's collapse on Xstrata's failure to raise the finance to complete the deal. He now expects the Anglo-Swiss mining giant to resume its own share buyback programme.
Liberum does not rule out a deal being eventually thrashed out. Deutsche Bank raided the market on Xstrata's behalf this morning, snapping up 22 million Lonmin shares at 2000p each.
The aim was to take its stake to 29%, thereby blocking any rival bidder, while averaging out on its losses. Meanwhile, BHP Billiton fell 29p to 1230p despite the Australian authorities giving the green light to its proposed acquisition of Rio Tinto, up 28p at 3499p. The US Department of Justice gave its blessing to the bid in July.
Anglo American put on 18p at 1873p after Goldman Sachs added the shares to its Pan-European buy list. But it has cut its 12-month target on the shares from 4509p to 3284p. But Vedanta Resources lost 91p at 1062p after Goldman added the shares to its Conviction Sell list.
It says: “Vedanta looks exposed in our hard-landing scenario given its very heavy capital expenditure plans, which are at risk of delays in the event of a slowdown, thus delaying Vedanta's next volume surge.”
The best one-day performance by Wall Street in six years went some way today to restoring the confidence of City investors following a fraught 48 hours during which they had to endure some of the most volatile trading conditions in living memory.
The London market managed to build on yesterday's rally, but earlier gains were pared back by opening falls on Wall Street this afternoon. The FTSE 100 index rose 33.9 to 4936.3, but in New York the Dow fell 178.2 to 10,672.5 ahead of tonight's vote by the Senate on the proposed bank bailout.
HBOS rallied 20.7p to 143.1p, despite going ex-dividend, after the Government made known its determination to push through the shotgun takeover by Lloyds TSB, up 28¾p at 255¼p. The merger terms are now worth 212p a share to HBOS shareholders but remain 63p shy of this year's £4 billion rights issue price.
Standard Life, up 15p at 255p, holds 3% of HBOS shares and says it will back the deal. Royal Bank of Scotland fell 10.8p to 168.2p. Its Ulster Bank subsidiary is not included in Ireland's bail-out package, which guarantees the deposits of savers. There are now fears savers will withdraw their funds and deposit them with guaranteed banks.
Inter-dealer broker Icap gave back some of yesterday's gains with the price softening 11p to 344p. Citigroup has slashed its target price from 555p to 480p and lowered its earnings-per-share forecast for next year by 4.8% to 34.2p. It has cut its forecast for 2010 by 8.2% to 38.2p a share. It made its move on the back of Icap's recent trading update and increased concerns about the customer base.
On AIM, shares of Jarlway were suspended at 0.375p pending publication of half-year results. Also on AIM, shares of Your Space were suspended at 35p awaiting publication of the annual report and accounts. West Pioneer was suspended at 75p, down 5p, also awaiting the report and accounts
