Morning:
8°c
The price of gold traded at a record high of $1108.00 an ounce on world markets today in response to a weaker dollar.
Copper and other raw materials were also trading higher on the basis that a weaker greenback means buyers get more bangs for their buck.
Dealers say the outlook for metals such as gold and copper remains bright with most of the big hedge funds having sold the dollar short in the belief that the US economy is in a worse state than many investors had thought.
This pessimism was highlighted by Friday's non-farm payroll showing that total unemployment had reached 10.2% of the workforce — the worst level for nearly 30 years.
So when things turn sticky, the first refuge for any self-respecting investor is gold. That in turn is good news for the companies which dig the stuff out of the ground, such as Randgold Resources, 87p higher at 4685p, and Anglo American, up 81p at 2466p.
But the clamour for other metals also lifted the likes of Rio Tinto, 109p rise to 3024½p, Kazakhmys, 61p at 1274p, Xstrata, up 35p at 997½p, and Lonmin, 40p dearer at 1604p.
Citigroup has, in turn, raised Antofagasta, 32p better at 885½p, from hold to buy as well as Ferrexpo, 7p up at 167p. It has also increased its target for Vedanta Resources, 64p up at 2327p, from 2300p to 2350p.
The heavy weighting of mining companies among leading shares also helped squeeze the FTSE 100 index up 67.98 to 5210.70. The wider FTSE 250 index rose 112.22 to 9194.91.
Sentiment generally was bolstered by the G20 meeting of finance ministers in St Andrews over the weekend. The ministers have pledged to keep pumping liquidity into the system for the foreseeable future, at least.
Banks helped to lead the charge with Royal Bank of Scotland adding 1.9p to 38.9p, Barclays putting on 6½p at 343p and HSBC gaining 6¾p to 690p.
The life assurers were also a firm market. The industry body that sets the guidelines on rules for pension annuities has agreed to extend the time limit on negotiations. Prudential was one of the best performers in the market with a rise of 26½p at 604½p. It was pursued by Legal & General which added 3p at 83p, Standard Life 7p at 220p, and Aviva 9p at 402p.
At the same time, ING has raised its targets on a total of 12 European insurers and is urging clients to target those companies building businesses in emerging markets because developed economies will grow slowly. ING has a gold rating on Prudential but has hiked its target from 392p to 584p, while Legal & General is seen as a sell with its target raised from 36p to 52p.
Aviva is tipped as a buy with the target moving from 434p to 523p, while RSA Insurance, 0.1p firmer at 122.3p, and Standard Life are both seen has hold. The target on RSA is dropped from 131p to 129p, while Standard goes up from 157p to 232p.
Bid target Cadbury lost 6½p to 751½p having touched 790 after Kraft refused to increase the terms of its miserly bid, worth 740p a share. Institutions had been holding out for at least 850p a share but the absence of any counterbids meant Kraft could be less generous.
JPMorgan says that while US healthcare reform is still not finalised, the impact on pharmaceutical companies is likely to be moderate. Most companies have been shown to be fairly recession resistant. It sees significant scope for improvement from current levels in shares of all European large caps but with only 10% to 12% upside for UK operators such as GlaxoSmithKline, 6p firmer 1225½p, and AstraZeneca, 24p higher at 2721p. JPMorgan has jacked-up its price target for Glaxo from 1050p to 1350p. Meanwhile, RBS has raised AstraZeneca from hold to buy. Also in the sector, Shire put on 42p at 1137p, making it one of the best blue-chip performers.
There were cheers all around for AIM-listed Synairgen as it saw its shares soar 21½p to 51p on the back of successful trials of its inhaled interferon beta which confirmed the anti-viral potency against swine flu.
Execution likes the look of Hiscox. up 9¾p at 337½p, after a positive trading update.
Execution's Joy Ferneyhough is pinning her hopes on a “very strong second half” with profitability, reflecting strong investment yield and very low loss ratios. The insurance underwriter has exposure to the most profitable lines and low exposure to long-tail casualty issues which she believes may emerge in 2010. “The attractive yield offers good value”, she adds.
