Daily Market Report: 4th January 2012

Daily Market Report: 4th January 2012

The FTSE 100 had a buoyant morning session yesterday with demand for banking and resources stocks leading the charge into 2012. The index finished with a whopping gain of 2.29% with most commentators pointing to the fact that it was playing catch-up with European markets which were open on Monday.

Moderately encouraging manufacturing data from China pushed mining stocks higher whilst new export orders in the UK rose for the first time in five months in December.

Talvivaara Mining saw its share price rocket into the top spot on the FTSE 250 after it announced that it has reached its production target for 2011. Full year production totalled 16,087 tonnes of nickel and 31,815t of zinc, while fourth quarter production of 4,769t nickel and 10,524t zinc was a new quarterly record.

Elsewhere in the mining sector, a bitter legal battle appears to be brewing between FTSE 100 mining firm Anglo American and the Chilean, state-owned copper miner Codelco. Anglo says it has received a letter from Codelco seeking to exercise an option to buy a 49% stake in Anglo American Sur, a huge copper mining plant in Chile that Anglo has spent billions upgrading. On December 22nd, Anglo filed a legal complaint for breach of contract over what it describes as an “illegitimate premature attempt to exercise the option.” Both firms say they are willing to work to a negotiated settlement.

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So far this morning the FTSE 100 has defied expectations of a soft start and has crept above the 5,700 barrier, helped by continuing demand for resources stocks.

Fashion chain Next is a drag on the index, however, after a cautious trading statement. The company said “despite a good final week before Christmas, November and December sales were disappointing”.

Sector peer Marks & Spencer dips in sympathy with Next, while other retailers under the cosh in early trading including DIY specialists Kingfisher and Home Retail, plus newsagent WH Smith and car parts & bike seller Halfords.

Smith and Nephew, the medical technology business, is wanted after it announced plans to transfer the bulk of its US biologics team and Clinical Therapies business to a newly formed joint venture (JV), called Bioventus. The deal will dilute earnings slightly, but the company will receive a 49% stake in the JV, as well as $98m in cash and will receive a $160m 5-year note from Bioventus. The majority owner of Bioventus is Essex Woodlands, a specialist healthcare growth equity and venture capital firm.

Pizza delivery firm Domino’s Pizza saw a slow-down in year-on-year like-for-like sales growth in the final quarter of 2012, but this was expected, with the company facing tough comparatives, and the company’s new Chief Executive Officer, Lance Batchelor, said the company will meet profit expectations for 2011.

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Kefi Minerals, an AIM-listed gold and copper exploration company, has been awarded two mineral exploration licences in Saudi Arabia. The licences, which are for a period of five years, are located in the Central Arabian Gold Region, and have been awarded to a joint venture company in which Kefi Minerals has a 40% interest. Kefi is the operating partner in the joint venture.

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