UK equity markets took a surprisingly hawkish US Federal Reserve in their stride as the FTSE 100 climbed back through 7,000 points at one point yesterday, but gold miners missed out on the rally.
The precious metal fell to its lowest since early February as the dollar rose to a 14-year high after the Fed raised rates for only the second time since the financial crisis of 2008 and after officials signalled three increases next year rather than the two that markets had been expecting.
With gold losing more of its lustre, down at $1,126.48 an ounce, making the dollar-denominated metal more expensive for foreign currency holders, investors also sold producers. Randgold Resources, the African miner, was the biggest faller on the FTSE 100, down 470p to £54.70, and Fresnillo, a Mexican rival, was 66p lower at £11.14. Centamin, operator of the Sukari goldmine in Egypt, was the heaviest faller on the FTSE 250 mid-cap index, down 15½p to below 115p; and Acacia Mining, formerly African Barrick Gold, shed more than 37p to 360¼p. Hochschild Mining, 18½p lower to 224½p, was also hit after it said that production at its Pallancata silver mine in Peru had been suspended temporarily amid a dispute with locals over land access.
Copper miners were also in the red, despite the industrial metal ending up 0.2 per cent to $5,732 a tonne on the London Metal Exchange. Antofagasta, the Chilean miner, failed to track it higher, closing down 37½p at 683½p.
They trailed a FTSE 100 that closed up 49.82 points, or 0.72 per cent, at 6,999.01, albeit off its highs for the session. The broader FTSE 250 finished 86.97 points, or 0.49 per cent, better at 17,769.35, despite the strong dollar pushing the pound towards a one-month low. European stock markets joined in the rally and Wall Street continued its breathless rise with the Dow Jones industrial average targeting the 20,000 mark.
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Banks, whose profit margins tend to benefit from rising rates, were boosted by the Fed’s confidence in the strength of the US economy. Royal Bank of Scotland was a top riser, up more than 9½p to 227p; Barclays rose 7¾p to 229½p; and Lloyds Banking Group gained 1½p to 64½p.
Topping the blue-chip index was Centrica, up 12¼p to 231¼p, after the owner of British Gas raised its annual profit forecast, citing a decent performance from its trading business and cost cutting. Likewise GVC Holdings. The owner of Sportingbet, which had been in talks with the newly merged Ladbrokes Coral recently, rallied to the top of the mid-cap risers’ board, up 48p to 663p, after it raised its previously announced special dividend by 49 per cent, off the back of a strong fourth-quarter trading period.
Bullish broker research also pushed stocks higher. Aggreko, the temporary power provider, was upgraded to “buy” by analysts at Deutsche, who argued that earnings should get a boost from a resurgent oil and gas market. The industry made up 15 per cent of revenues last year. Aggreko climbed 41p to 917½p.
Deutsche also upgraded WH Smith, 63p dearer at £15.10, to “buy”, citing the strength of the opportunities for the retailer’s outlets at travel locations overseas. The German broker also said WH Smith could grind out more cost savings from its high street shops, which have underperformed the travel business.
Investor cashes in on bear raid
The identity of the short-seller and the money behind this week’s bear raid on Paysafe is a mystery, but one investor is known to have cashed in on the share price fall.
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Sand Grove Capital Management cut its short position in the FTSE 250 digital payments company on Tuesday from 0.72 per cent to zero, according to regulatory filings.
Shares in Paysafe had fallen sharply that day after a report from Spotlight Research, a largely unknown short-seller, was published on Seeking Alpha, an online investment research platform.
The report had alleged, among other things, that Paysafe appeared to enable illegal gambling in China. Paysafe robustly hit back at the report, stating all material information in the report was either inaccurate or previously disclosed. Analysts at a number of stockbrokers have since also shrugged off the findings, although Paysafe’s shares remain down about 12 per cent.
A source close to Sand Grove said that it was not connected to Spotlight.
Oxford Asset Management, AEK (UK) and Public Equity Partners Management all retain bets against Paysafe’s shares, holding a combined 5.75 per cent position.
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Wall Street report
Stocks rose, led by gains in bank shares, a day after the Federal Reserve raised interest rates for the second time in almost a decade. The Dow Jones industrial average added 59.71 points, or 0.3 per cent, to close at 19,852.24.