Morning:
8°c
Leading shares looked to consolidate above the 4900 level on the London stock market today, forcing nervous investors to hedge their positions.
Stocks generally posted modest gains as investors continued to feed on the latest rash of takeovers in the hope it may be the start of a new trend. The FTSE 100 index rose 5.18 points to 4938.36. Credit Suisse remains upbeat about prospects. It is sticking with a Footsie 100 year-end forecast of 5100 but is now looking for 5600 by the middle of next year.
Mike Lenhoff, equity market strategist at Brewin Dolphin, is looking for a year-end target of 5000, but says that could grow to 5500 within a matter of months.
Investors on Wall Street had some catching up to do after their long weekend. Shares opened higher lifting the Dow Jones 38.31 to 9479.58.
They were happy to chase the price of gold back above $1000 an ounce on the US futures and spot market for the first time in six months. Dealers said speculators are running scared about the dollar's continued weakness and the sustainability of the global economic recovery.
Some traders are sceptical about the precious metal being able to sustain its current levels. Buyers hoarding the stuff are said to range from private investors through to institutions.
The gold spot price has risen above $1000 just five times in the past; on Tuesday, once in February and three times in March last year.
Mining shares responded to the latest move in gold, the weaker dollar and the outlook for commodity prices generally. Kazakhmys rose 46p to 1058p, Rio Tinto 59½p to 2524p and Fresnillo 20p to 700p.
Goldman Sachs has joined the debate on commodity prices. It says: “Increasing evidence of a stronger-than-anticipated recovery in global industrial activity is leading us to revise our price forecasts higher across most of the base metals complex”. And it remains a big bull of copper. “We have raised our LME copper price forecast for the end of 2010 from $5800 per metric ton to $7650.”
Lonmin added a further 19p to 1690p amid continuing hopes of a renewed bid from Xstrata, up 17½p at 872p. Xstrata offered 3300p a share last October but this was rejected. The Lonmin price has come up from 1361p since last week.
Aquarius Platinum fell 6½p to 274p following a placing of 9 million shares at the 265p level.
British Airways climbed above the 200p level with a rise of 7.3p to 200.1p. Dealers say the shares are benefiting from growing hopes that the proposed merger with Spain's national carrier Iberia can be quickly concluded. There are also signs that the slump in passenger numbers for airlines worldwide has started to slow.
Shares of bid target Cadbury briefly topped 800p for the first time in more than two years before paring back its lead by 7½p to 791p, while it continued to trade at a premium to the 745p a share being offered by America's biggest food producer Kraft. Jefferies Research believes Kraft will have to stump up more for its bid to succeed. It now has placed a take out value of 900p.
US investment bank JPMorgan has repeated its neutral rating on Cadbury, but has jacked-up its target from 610p to 820p. The credit rating agency Standard & Poor's has lifted its rating from hold to buy.
Only yesterday, Sanford Bernstein put a price target on the confectioner of 1008p a share. Marks & Spencer stood out with a rise of 9.4p to 364.4p as Goldman Sachs added the shares to its influential Conviction Buy list. Long-term bear Investec continues to rate M&S a hold, but has hiked its pre-tax profit forecast for next year from £475 million to £530 million and its target from 315p to 350p following a review of M&S's autumn clothing range. Margin recovery this year will make progress next year that much more difficult.
Jefferies is also upbeat about the UK's big food retailers. Wm Morrison, 0.6p cheaper at 286.4p, is top of its shopping list with a target of 300p. It offers the best prospects on both margin and sales growth with a compelling valuation. Tesco, 0.3p off at 376.8p, is rated overweight with a target of 410p, but needs to protect margins in the UK, while J Sainsbury, 6.1p dearer at 333.8p, is rated a hold with a target of 340p. The shares may yield 4.2%, but earnings growth is described as pedestrian.
