FTSE CLOSE: Xstrata and Glencore surge after confirming 'merger of equals' talks
London's leading shares index failed to gain significant ground today after a raft of blue-chip results overshadowed optimism in the US and merger talks in the mining sector.
The FTSE 100 Index closed 5.4 points ahead at 5796.1, just inches away from its six-month high of 5800, after US Federal Reserve chairman Ben Bernanke said the world's largest economy had recently shown signs of improvement.
Meanwhile, the prospect of a multi-billion pound merger between mining giants Glencore and Xstrata boosted the heavily-weighted resources sector and lent support to the wider market.
However, shares in Unilever,
AstraZeneca and Royal Dutch Shell were all lower after their full-year
figures disappointed investors.
The pound was down at 1.58 against the
US dollar, after strong unemployment data in the US boosted the
greenback, while sterling also slipped against the euro to 1.20.
In London, consumer products giant
Unilever sank to the bottom of the FTSE 100 Index after full-year
figures showing a 1 per cent rise in operating profits included a
slowdown in sales volumes in the fourth quarter.
It said price hikes, coupled with weak
consumer confidence, meant growth in sales volumes slowed to 0.1 per
cent in the final three months of the year, fuelling fears of slowing
growth in emerging markets. Shares were off 91p at 1994p.
Pharmaceuticals giant AstraZeneca was
down 3 per cent, after fourth quarter profits came in lower than
expected, while it also warned that 2012 revenues and profits were
likely to be lower.
The firm, which is struggling to
replace a series of blockbuster drugs as their patents expire, announced
plans to cut another 7,300 jobs by 2014.
Its shares fell 105.5p to 2984p while rival GlaxoSmithKline was down 28.5p at 1396p ahead of its results next week.
Shell was also under pressure after
its fourth quarter earnings came in below expectations, although it
still managed to post a profits haul of 18.1billion for the year as a
whole, a jump of 54 per cent on a year ago.
Trading in the final quarter of the
year was impacted by a squeeze on refining margins and lower American
natural gas prices, causing its shares to shrink 28.5p to 2297.5p. Rival
BP, which posts figures on Tuesday, was down 5.1p at 477.9p.
Miner Xstrata said it had been
approached by commodities trader Glencore with a potential merger
opportunity – which propelled both companies to the top of the risers'
board.
Xstrata shares were 10 per cent or
111p higher at 1230.5p, and Glencore – a relative newcomer to the London
market – rose 29.95p to 461.7p amid talks about creating a firm worth
more than 50billion.
The latter already owns a third of
Xstrata and is keen to develop as a stronger challenger to heavyweights
Rio Tinto and BHP Billiton.
Fellow miners were boosted by the
improved sentiment, with Vedanta Resources up 72p at 1323p and Randgold
Resources ahead 120p at 7420p.
The biggest Footsie risers were
Xstrata up 111p at 1230.5p, Glencore ahead 29.95p at 461.7p, Vedanta
Resources up 72p at 1323p and Icap ahead 19.3p at 381.3p.
The biggest Footsie fallers were
Unilever down 91p at 1994p, Severn Trent off 56p at 1501p, AstraZeneca
down 105.5p at 2984p and ARM Holdings off 15.5p at 577p.
16.10:
The Dow Jones has moved 17.3 points higher to 12,733.7, but investors
are showing caution ahead of the U.S. non-farm payrolls report tomorrow.
'Current
expectations are for the rate of US jobs growth to recede somewhat from
a surprisingly strong December labour market,' said Joshua Raymond,
chief market strategist at City Index.
'December’s
labour force was always expected to gain strength as businesses catered
for the likely increase in consumer activity over the holiday period.
The strength of December’s jobs increase is now expected to see a
slowing of hiring in the US last month as businesses scale back
somewhat.'
The FTSE 100 is ahead 14.7 points at 5,805.5 as the session draws to a close.
15.05:
The Dow Jones has given up brief opening gains and slid 13 points into the red to 12,703.5.
Traders across the Atlantic are assessing mixed economic data. Jobless claims fell by more than expected last week. However, productivity growth slowed in the final quarter of last year.
The monthly non-farm payrolls report – a key gauge of the U.S. labour market and health of the wider economy – is due to be published tomorrow.
The FTSE 100 has edged 1.9 points into the black at 5,792.7 but remains within a narrow trading range today.
13.20:
The FTSE 100 is 9.6 points lower at 5,781.1 as the situation in Greece continues to weigh on investor confidence.
A deal with creditors to allow the country to avoid a default is still bogged down in talks.
However, gloom over Greece was partly offset by encouraging government debt auctions in France and Spain.
Investors are also preoccupied by a potential tie-up between mining giants Xstrata and Glencore.
Xstrata shares are up 121.5p at 1240.8p, while Glencore's are 27p higher at 458.7p.
Elsewhere in the mining sector, Vedanta Resources is up 59p at 1307p and Randgold Resources is ahead 187.5p at 7487.5p.
Futures trading points to a lower open on the Dow Jones. Traders are awaiting two U.S. jobs reports and productivity data for the final quarter of last year.
Federal Reserve chairman Ben Bernanke is due to testify about the state of the U.S. economy to Congress's House Budget Committee later.
11.55:
The FTSE 100 is 10.5 points lower at 5,780.2 in late morning trading.
'Slightly disappointing numbers from Shell meant that the index started the day lower, although news of deal activity among the miners kept it from losing too much ground,' said Chris Beauchamp, market analyst at IG Index.
'The prospect of a tie-up between Glencore and Xstrata enlivened the sector, helping to offset the negative atmosphere generated by Shell and by consumer products giant Unilever, which predicted a difficult year ahead and only just managed to meet sales forecasts for 2011.'
Read more on Unilever here.
Gold is at $1,749.50 an ounce, just below the key resistance level of $1,750.
'If the risk appetite sustains itself then we could see continued strength in gold as the bulls take on resistance seen at $1,760 and $1,775,' said Simon Denham of Capital Spreads.
Brent crude is trading at $111.59 a barrel today.
10.00:
The London market remains sluggish despite the prospect of a multi-billion pound mining 'merger of equals' between Xstrata and Glencore.
Xstrata shares were 11 per cent higher – up 121.75p to 1241p – after it confirmed the two companies were in talks.
Glencore, which floated in London last year, rose 17.9p to 449.5p.
But the FTSE 100 dropped 13.8 points to 5,776.9 as market heavyweights Royal Dutch Shell and BP dragged on the market.
Shell was under pressure after its fourth quarter earnings came in below expectations, although it still managed to post a profits haul of 18.1billion for the year as a whole.
Its shares were 60.75p lower at 2265.5p, while rival BP was down 7.9p at 475p ahead of its own figures next week. Read more here.
AstraZeneca was also under pressure, down 102.75p at 2987p, as its profits were below forecasts and it warned sales and profits would be down in 2012.
The pharmaceuticals firm announced plans to cut another 7,300 jobs by 2014. Read more here.
Consumer products giant Unilever topped the fallers board after full-year figures showing a 1 per cent rise in operating profits included a slowdown in sales volumes in the fourth quarter. Shares were off 72.5p at 2012.5p.
8.50:
The FTSE 100 has opened 8.9 points lower at 5,781.8. The mood is a little more positive on the continent, where Germany's DAX is up 10 points at 6,626.6 and France's CAC 40 is ahead 6.4 points at 3,373.8.
Stocks to watch today include:
Royal Dutch Shell, AstraZeneca, Smith & Nephew, Unilever: Fourth-quarter results.
Compass Group, Dairy Crest, Great Portland Estates: Trading updates.
Glencore, Xstrata: Glencore International is nearing an agreement to combine with Xstrata in a deal that may value the combined entity at 52billion pounds, Bloomberg said, citing two people with knowledge of the plan.
Vedanta Resources: The chief executive officer of Cairn India, in which London-listed miner Vedanta Resources acquired a majority stake last year, has sold more than half his shareholding in the oil and gas explorer for 512.68 million rupees ($10.5million), the company said in a stock exchange filing on Thursday.
Royal Bank of Scotland: American investment bank Jefferies Group has snapped up historic British stockbroker Hoare Govett from RBS, building on its aggressive expansion in the London marketplace in the past three years.
Trinity Mirror: The newspaper publisher is facing renewed pressure to rein in the pay of its chief executive Sly Bailey from some of the biggest shareholders in the media group, The Financial Times said.
Trinity Mirror said on Wednesday it will cut almost a fifth of its editorial staff as part of a plan to overhaul the newsroom behind its popular tabloids Daily Mirror, Sunday Mirror and The People.
Shanks: The waste management firm could be the target of a cash rich private equity player, possibly old foe Carlyle, which is rumoured to be ready to launch a full-scale offer for the company at up to 140 pence per share, according to the Daily Mail market report.
Numis Corp, Avon Rubber, Baltic Oil Terminals: Annual general meeting.