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Mining Deal Bolsters FTSE, While Tech Sentiment Suffers

TUESDAY MARKET UPDATE: Shareholder approval of the Glencore-Xstrata tie-up boosted mining stocks, but banks and tech stocks lagged

Holly Cook 20 November, 2012 | 6:09PM

UK shares continued to build on Monday’s rally, with Tuesday’s leaderboard dominated by natural resource stocks after shareholders approved the merger of Glencore and Xstrata.

The FTSE 100 index closed 10 points firmer, up 0.2% at 5,748. The FTSE 250 index enjoyed a more upbeat session, rising 76 points or 0.7% to close at 11,821.

Markets shrugged off the previous evening’s ratings downgrade for one of the eurozone’s strongest economies, though the Paris CAC 40 slipped into the red Tuesday as investor digested news that Moody’s Investors Services have stripped France of its AAA rating. Moody’s cited concerns about an uncertain fiscal position in France as a result of its weakening economy. The agency also reiterated its negative outlook for the banking sector.

The downgrade hurt banking stocks, with Barclays (BARC) sliding 1.3%, HSBC (HSBA) down 0.6% and Standard Chartered (STAN) off 0.2%.

Such losses were largely offset, however, by strength among the London-listed mining stocks. Glencore International (GLEN) and Xstrata (XTA) shareholders voted their approval of the companies' merger today in a deal that sees the commodities trader snap up the diversified miner for a decent price, according to Morningstar analysts. While shareholders approved the merger, they rejected retention bonuses for Xstrata’s senior managers, prompting chairman John Bond to say he will resign.

Shares in Xstrata topped the leaderboard by close of play, up 3.1% but still just shy of Morningstar’s 1,000p fair value estimate for the stock. Glencore shares took on 1.6%, while other mining giants Antofagasta (ANTO) and Fresnillo (FRES) gained 2.3% and 1.8%, respectively.

Elsewhere in Europe, all eyes were on Greece and a meeting of the eurozone finance ministers this evening. Market moves indicate an expectation that an affirmative decision will be made regarding the release of the next load of bailout cash for Athens, but recent trends suggest that, almost irrelevant of the details of the imminent announcement, it could trigger profit-taking.

Across the pond, shares in tech giant Hewlett-Packard (HPQ) plunged after the firm said it will take a $8.8 billion write-down related to “serious accounting improprieties, disclosure failures and outright misrepresentations" that occurred at Autonomy before H-P’s acquisition. Autonomy, which was formerly traded on the London Stock Exchange, was bought by H-P for $10 billion. H-P has asked the SEC and UK fraud office to open investigations.

In London, software firm ARM Holdings (ARM) slipped in apparent response to the negative tech sentiment. 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author Holly Cook

Holly Cook  is Managing Editor of Morningstar.co.uk