After a torrid few days, mining shares are edging higher again, giving the overall market a lift.
Worries about a global economic slowdown, particularly in China, have led to falling metal prices, with iron ore especially weak. But investors seem to feel the declines may have been overdone and are dipping their toes back in the water, albeit fairly tentatively.
So Kazakhmys has climbed 16.5p to 603p while precious metals miner Fresnillo is 33p better at £15.76.
Glencore, unsettled by the prospect of a collapse in its proposed merger with Xstrata, has added 10p to 367.45p. Qatar, the second largest investor in Xstrata, has confirmed it will vote against the deal unless the terms are improved.
But analyst Ash Lazenby at Liberum Capital is positive on Glencore even if the merger fails:
Glencore should strongly outperform the sector from here whatever the outcome on the deal. Glencore/Xstrata is the cheapest major on a merged basis and has no exposure to plummeting iron ore, standalone Glencore is by far the cheapest and has the best free cash flow metrics and earnings momentum.
We retain our buy recommendation on Glencore and hold on Xstrata, and while we see limited downside to Xstrata on a break we estimate 25% outperformance in Glencore.
The revival in mining shares has helped lift the FTSE 100 16.52 points higher to 5735.97.
Among the fallers, WPP has lost another 10p to 808.5p following Thursday's cut in its annual growth forecast as clients in the US and western Europe became more cautious about their advertising spending. Investec said:
We move to hold from buy as we see limited near-term catalysts, but will revisit when the third and fourth quarters become clearer. Outlook reduction is a disappointment but not a disaster, in our view, and fundamental attractions remain, i.e. international/emerging exposure. Shares may drift for now, and we believe it would be interesting to look to buy on any general market setback.
