Buy anything with iron in it. That was the message on trading floors yesterday after the Chinese purchase of a stake in Rio Tinto.
Until yesterday, the bears had been saying that BHP Billiton’s bid for Rio was a sign that the mining boom had peaked, but the Chinese move high-lighted the country’s desperate desire for iron. The cost of ore is set to rise by 70 per cent this year, according to some forecasts, when a new price is agreed in negotiations with China and the big suppliers.
Shorters of mining stocks were panicked into closing their positions and even BHP, which cannot really gain from its bid for Rio being blocked, enjoyed a 145p rally to close at £16.22. Rio rose 644p to £56.
In the FTSE 250, Ferrexpo, the recently floated Kazakhstan iron miner, rose 28¾p to a new high of 270p. ENRC, another Kazakhstan metals miner, gained 60p to close at 830p, putting it at a 50 per cent premium to its float price with a market capitalisation of more than £10 billion, allowing it to enter the blue-chip index in the March reshuffle.
A bid approach forFKI, the mid-cap engineer, also helped to lift sentiment and the FTSE 100 broke back through the 6,000 mark, closing up 149.4 points at 6,029.2. FKI soared 16¾p to 67p after saying that it had received an approach from an unnamed bidder. In June, the engineer received a 130p offer, thought to be from Blackstone, the American buyout firm, but talks were abandoned two months later.
Advertisement
Bodycote, the metals coating company that was been the subject of a failed bid approach from Sulzer, of Switzerland, last year, rose 7½ per cent to 189p.
Vedanta Resources was up 160p at £19.60, Antofagasta, the Chilean copper miner, gained 47½p to 700p and Anglo American was up 160p at £29.10.Xstratagained another 176p to close at £40.03. If BHP walks away from a bid for Rio, there will be bank capacity to lend to Vale, of Brazil, for its Xstrata offer, but the word from Brazil is that an offer is some way off.
Shorters also closed out of the property sector amid hopes that the cuts in American interest rates might avert a total collapse of the property market there. Taylor Wimpey, the housebuilder with US exposure, bounced 13¾p to 193p. Persimmon was up 21p per cent at 792p. Wolseley closed up 35p at 721p.
British Airwaysfell 14p to 318p after an inline trading statement. It has rallied of late amid talk of a Middle Eastern bid or stake-building.
Smith & Nephew, the knee joint supplier, which has surged in the past few days on vague bid talk, succumbed to profit-taking, closing down 26½p at 655½p. British Land fell 22p to 988p after Credit Suisse cut from “out-perform” to “neutral” and its target price to £11.73.Southern Cross Healthcare was lifted 34½p to 385p by vague bid chatter. Shares in the operator of nursing homes have slipped amid worries over the departure of the finance director and whether the credit crunch would stop banks financing its care home acquisition strategy.
Advertisement
New York: Shares on Wall Street advanced after investors set aside some anxiety over news that the economy had lost jobs last month and focused on Microsoft’s bid for Yahoo! The Dow Jones industrial averaged closed at 12,743.20 points, up 92.80.