Mining group Xstrata has recovered the ground it lost last week after it unveiled a £4.1bn rights issue at a heavily discounted 210p a share.
It shares have jumped 61.5p to 627p today, helped by a buy recommendation from Goldman Sachs which said the cash call significantly reduced the likelihood of the company breaching its debt covenants. The bank said:
"We believe that both Kazakhmys and Xstrata (post rights issue) offer attractive potential upside. Both have high earnings sensitivity to the copper price, the metal that we believe has the tightest [supply] fundamentals at present."
Kazakhmys closed 22.25p higher at 244p while Vedanta Resources, where Goldman moved from sell to neutral, added 32p to 575p.
Antofagasta added 16.25p to 423.25p as it reported an 11.6% rise in copper production last year, higher than its previous forecasts, but warned it might take impairment charges on some of its assets. Iron ore company Ferrexpo finished 6.25p higher 57p after an upbeat trading statement.
Two of the heavyweights in the leading index reported results to a slightly mixed reception. Vodafone pleased the market with better than expected third quarter figures, and its shares rose 9p to 137.15p. But BP disappointed investors initially as it reported a 24% drop in fourth quarter profits. Its shares fell as low as 461.5p before rallying at the close to 487.25p, up 2.5p.
Overall, with Wall Street edging higher in early trading after stronger than forecast pending home sales, the FTSE 100 closed 86.68 points higher at 4164.46. Once again, however, trading volumes were thin with the City hit by the winter weather conditions.
Among the other risers, insurance group Aviva added 25.25p to 332.75p on vague takeover talk, while International Power added 13.5p to 274.75p after a positive note from Morgan Stanley, which pointed out the current heatwave in Australia was leading to higher power prices there, which would boost the company's earnings.
Royal Bank of Scotland rose 0.2p to 20.6p as Sir Tom McKillop stepped down as chairman with immediate effect. Separately, analysts at rival HSBC raised their price target for RBS from 15p to 35p. HSBC itself was not so lucky, unchanged at 527p after Societe Generale issued a sell note. It said the bank should reduce its dividend if it needed to raise capital, rather than follow recent suggestions of a $20bn injection from a strategic investor or sovereign wealth fund . It said:
"While raising capital through one significant strategic investor has the benefit of speed, we believe it is not as beneficial to existing shareholders. Simply put, a temporary dividend cut is preferred to a permanent dilution for an existing shareholder."
Tui Travel dipped 2p to 216p as its parent company Tui AG said it was considering making a loan to its container shipping unit Hapag-Lloyd. The London Stock Exchange lost 33p to 422.5p on competition concerns and fears London could lose its prominent position in the global financial market.
Among the mid-caps Carpetright climbed 44.5p to 412p despite a 15.9% fall in sales in the 13 weeks to the end of January. The company said the latter part of that period had seen a better performance, and added that it would be interested in buying parts of rival Allied Carpets, put up for sale by its French owner. Teathers analyst Mark Photiades said:
"While we believe that earnings risk remains, Carpetright continues to gain share and is likely to emerge from the downturn in a stronger competitive position. The freehold property portfolio is also significant."
Freddie George at Seymour Pierce moved from sell to buy, saying:
"The company should see some benefit from recent acquisition, Sleepright, as the concept is rolled out across all stores while results of the European businesses should continue to be relatively robust. We further believe lower interest rates will stimulate mortgage approvals, one of the key drivers of carpet sales, and that the company is well placed to prosper from the potential fall out of Allied Carpets."
But a profit warning from Photo-Me International left the photo services group 1.5p lower at 9.25p.
Finally Redstone rose 2.75p to 12.25p. as the IT group said it had been appointed the preferred bidder for the Building Schools for the Future programme in Birmingham. Rival RM ended 1.75p higher at 166.75p despite missing out on the contract.
Analysts at Altium Securities moved their recommendation from buy to neutral. They said:
"This is clearly disappointing for RM; while no contribution from the deal was included in our estimates, RM was certainly viewed as front-runner for the bid - the largest BSF contract to be awarded so far at around £150m over seven years."
But Investec was more positive, saying:
"While not good news for RM, it is not disastrous, but just increases the pressure on the group to win a higher proportion of its 2009 pipeline."
