Investors moved tentatively away from defensive stocks on Monday as a little confidence returned to the market, to the benefit of mining companies and banks.
After heavy losses in the past two weeks, the FTSE 100 had regained some ground on Friday after better than expected US jobs figures, and the cautiously positive mood continued despite some more disappointing economic data from the eurozone. With European markets also moving forward, the FTSE 100 finished 35.74 points higher at 6563.65, helped by a seemingly calmer situation in Hong Kong after the pro-democracy protests.
Among the recently hard hit miners, Antofagasta added 26p to 706.5p as copper and other base metals edged higher as the recent surge in the dollar saw a pause. Anglo American was 33.5p better at £13.48 and with gold and silver off their recent lows, precious metals miner Fresnillo rose 25.5p to 745.5p. David Madden, market analyst at IG said:
In London calm has been restored to the markets as the protests in Hong Kong peter out. Mining companies are befitting on both sides, and increased stability in China is crucial for the natural resources sector with higher metal prices being the icing on the cake.
Among the financials, Barclays was 7.7p better at 232.3p while HSBC was 1.8p higher at 634p.
But United Utilities was down 5p at 805p and Shire slipped 25p to £54.30.
BG rose 27p to £10.93 after it said it had received $350m from the Egyptian government as part of a commitment to repay outstanding debts to the energy industry. BG still has an outstanding balance of $1.2bn with Cairo, and the company said it was working with the government to resolve the situation.
Elsewhere airline companies were in demand. EasyJet added 8p to £14.67 as Citigroup raised its price target from £16 to £16.70, while International Airlines Group climbed 6.1p to 371.3p as chief executive Willie Walsh told Expansion that Spain's Iberia could be as profitable as British Airways.
Tesco was up 4.6p at 176.75p following news the beleaguered supermarket was boosting its board with the appointment of two new non-executive directors, Richard Cousins of Compass and Mikael Ohlsson, formerly of Ikea.
Marks & Spencer added 5.4p to 405.9p despite one of the company's joint brokers, Citgroup, cutting its price target from 440p to 400p with a neutral rating. Citi analyst Richard Edwards said:
Following the recent unseasonally warm weather patterns, we have reduced our second quarter general merchandise like for like sales forecast to -4% (from -1%).... As a consequence... we have reduced our 2015 M&S pretax profit forecast by £10m to £650m.
Despite an assumption of around 150 basis point per annum general merchandise gross margin progress over the next three years, we fear that the ongoing sales channel shift from store-based to online sales will drive adverse group operating cost leverage as store-based like for like sales fade. In combination, these profit and loss dynamics are expected to limit 2014-17 estimated earnings per share growth to around 5% per annum. In this context we derive a neutral rating on the shares.
Among the mid-caps, Just Retirement jumped 6p to 126.3p as Deutsche Bank raised its recommendation from hold to buy, saying:
The monoline annuity providers have been heavily de-rated since the March budget. Initially this was fair: individual sales are now running at around 50% of pre budget levels. However, we think the market has completely misunderstood the latest tax changes [the abolition of the death tax, a 55% tax charge on any remaining pension pots in the event of death over the age of 75] which have knocked Just Retirement's shares by a further 20p in the last week. For Just Retirement's customers, we see no material impact whatsoever. And with value-protected annuities receiving the same tax benefits as pensions in drawdown, we think annuity sales might even gain. Given 50% upside to our going-concern value, we upgrade Just Retirement to buy.
Finally, Restore, the office services group, rose 14p or 6% to 240.5p after the £23.5m acquisition of a sizeable competitor, the UK records management business of Cintas. It will help pay for the deal with a £14.9m placing at 210p a share. Chief executive Charles Skinner said:
This acquisition is a major milestone in Restore's development and represents the most significant consolidation with the UK records management sector since we embarked on our strategy of acquisitive growth four years ago.
Analyst James Tetley at N+1 Singer said:
The acquisition will enhance group revenue by around £20m, making Restore the clear number two in the UK records management industry. It also brings critical mass to the group's recently underperforming scanning operation. We believe the deal should be received positively, given Restore's track record of integrating acquisitions and the considerable increase in scale that Cintas brings to the group.
