Leading shares have regained some lost ground as commodity prices recovered from recent losses.
Worries about global economic demand, especially in China, have hit metal and oil prices in recent weeks, but with some small gains in early trading, mining shares have moved higher. BHP Billiton is up 18p at 1036.5p while Rio Tinto has risen 53p to 2238.5p. Troubled Glencore, which has been hitting all time lows this week despite its recent refinancing, has moved 4.49p higher to 103.1p.
But with investors ending the week in a more positive mood, havens such as gold and silver have slipped back. So Randgold Resources, down 40p at £39.06, and Mexican precious metal miner Fresnillo, 4p lower at 617p, are current the only two fallers in the leading index.
Overall the FTSE 100 is currently 134.54 points higher at 6096.03, but is still on course for a small loss over what has been a volatile week. Overnight comments from US Federal Reserve chair Janet Yellen hinting that rates might still rise this year have, ironically, given some comfort to markets. When the Fed kept rates on hold last week investors took this as a sign the central bank was more worried than expected about the prospect of a global slowdown, so Yellen’s latest comments have helped ease some of those anxieties.
Elsewhere Imperial Tobacco has climbed 19p to £34.84 on talk of a possible breakup, while Johnson Matthey, which has been hit by the Volkswagen scandal since it supplies catalysts for diesel cars, is currently up 128p at £25.26.
Lloyds Banking Group has added 1.09p to 74.93p despite the UK government selling another 1% of the bank to take its stake below 12%.
Among the mid-caps Synergy Health has jumped 43% to £22.56 after a US Federal court denied a request by the Federal Trade Commission to block peer Steris Corporation from buying the company. Jefferies said:
While this ruling makes rational sense, it comes as a surprise to the market. The weak defence from Synergy management at the hearing had led many investors to believe that the deal was broken. We believe the new sterilisation superpower in a world of outsourcing and strong procedure growth is poised for significant growth.
Drax is up 8.8p to 248.9p as it said it would not invest any more in the White Rose carbon capture and storage project and will withdraw when it is completed. Drax chief executive Dorothy Thompson told BBC radio:
We are in a very different financial situation today than we were two years ago when we decided to invest in the project. There have been changes to the government’s renewable policy but there have also been dramatic movements in the commodity markets and that has greatly reduced our profitability.
Analyst Angelos Anastasiou at Whitman Howard:
This decision is not a great surprise given the growing potential uncertainty in green energy subsidies in the UK, and it does not affect Drax’s biomass conversion projects in any way. These latter projects remain the key for Drax and, operationally, are progressing as planned. Two of the three converted units are operating under the Renewables Obligation (RO), and the third is still waiting for clarification on EU state aid clearance, but will operate under the RO if this is not given.
Today’s announcement is not of great relevance to the overall investment case at Drax, and we do continue to see value there, although it remains unloved by the market.
