The Markets


The FTSE 100 hit a three-week high after getting a morning boost from a strong overnight performance in Asian markets, despite disappointing Japanese GDP figures. The index closed up 72.38, or 1.09pc, to 6736 points as afternoon trading tracked steadily upwards, free from any US wobbles as the New York markets were closed for Presidents’ Day.

Miners pushed the blue-chip index higher with Randgold Resources rising 83, or 1.7pc, to £48.57 and Polymetal lifting 26.5, or 4.03pc, to 684p on recovering gold prices. Aim-listed Minera IRL also bounced up 1.625, or 14.9pc, to 12.25 after announcing positive operational production results at its Peruvian gold mine.

Gold prices rose by a further $9.95 during London trading, breaking above their 200-day moving average to lift above the $1,300 level.

The yellow metal’s bounce is “punishing all those bearish bets of earlier this year as investors hedge their bets in respect of this stock market rebound,” said Michael Hewson, chief market analyst at CMC Markets. “The weaker US dollar isn’t helping gold bears in this regard either.”

Mid-capper Essar Energy has lifted by 2.15, or 3.26pc, to 68.15p after its majority owners, India’s Ruia brothers, outlined a 70p-a-share takeover proposal for the 22pc of the company they don’t already own.

The move has already sparked anger in the City as the move comes just four years after the brothers raised £1.2bn from UK investors by floating the company at 420p.

However, analysts at Deutsche Bank said: “Investors may find the offer unattractive although there is a difficult outlook for the company… given significant operational challenges in the power business, low refining margins and high leverage, which may also make hanging on to the shares unappealing.”

Meanwhile, energy supplier SSE fell by 6p to £13.83 after energy regulator Ofgem tightened the screw on electricity distribution companies to demand they accept lower rates of return on equity and capital over the next two years.  In a move to keep bills down the UK electricity and gas regulator issued guidance saying that it will lower the assumed cost of equity to 6pc, resulting in an assumed cost of capital of 3.8pc.

Mid-capper Telecom Plus rose by 68, or 3.75pc, to £18.79 after the group said that it expects full-year profits to be in line with estimates. The company, which trades as Utility Warehouse, also said that it intends to raise its total dividend by 13pc to 35p for the full year.

Back among the blue-chip businesses, Vodafone, which is set to flood the City with a £51bn dividend as a result of the sale of its stake in US mobile provider Verizon Wireless, rose by 4.1 to 222.5p after analysts at Jefferies raised their target price to 238p to 216p but kept their rating on “Hold”.

Outsourcing group Capita climbed 12p to £10.62 after the group won a nine-year contract in Scotland worth £325m that will see it connect up public sector computers.

Engineer IMI put its share consolidation plan to return £620m to its shareholders into action, causing the shares to rise 36.2p to £15.30.

The company, which specialises in fluid control systems, reached an agreement in December to sell its beverage dispensing and merchandising divisions for $1.1bn (£657m) to Warren Buffett’s Berkshire Hathaway.

DCC reversed earlier losses to claim the FTSE 250’s top spot despite saying that its trading in its energy division had been impacted by mild weather.

The sales and marketing support services company lowered its previous operating profit guidance but reassured investors that it should recover as trading in the rest of the group was strongly ahead of the year before.

Analysts at Investec said that additional spend of £66m on acquisitions since September should boost next year’s earnings by around 4pc. DCC closed up by 133 to £29.18.

Rolls-Royce continued to be punished by investors after the engine-maker’s dreary results last week. Last Friday’s news that the Serious Fraud Office had begun a probe into alleged corruption at its Asian operations continued to weigh on the stock. Shares in Rolls closed down by 19p, or 1.85pc, to £10.06.

Source; Telegraph