284 lines
8.6 KiB
Plaintext
Executable File
284 lines
8.6 KiB
Plaintext
Executable File
finance
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markets
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marketreport
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8534287
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-----
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# Commodities rally as Goldman goes long
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## Having last month prompted a sell-off in mining shares after calling the
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top of the commodities boom, Goldman Sachs had the opposite effect on Tuesday
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after decreeing it was once again time to go long.
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[![Rachel Cooper][1]][2]
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By [Rachel Cooper][3], City Reporter 7:12PM BST 24 May 2011
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[Follow Rachel Cooper on Twitter][4]
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[Comments][5]
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[FTSE today: market report live][6]
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Previous
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of Companies
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Next
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**FTSE 100**
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**FTSE 250**
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Analysts said in April - just as commodities trading giant, **Glencore
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Internationa**l, was preparing to float - that it was time to take profits in
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raw materials such as copper. But, this was a short-term view and given the
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recent slide in commodity prices, Goldman is now turning "more bullish".
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That helped metal prices - and mining shares - acclerate, with the likes of
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**Antofagasta **and **Fresnillo** putting on 36p to £11.96 and 54p to £13.56
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respectively. It also lifted Glencore, which advanced 11 to 525p on its first
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day of official trading, but that is still short of its 530p offer price.
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"Although we remain structurally bullish and have long argued the structural
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case for being long, timing does remain critical," said Goldman Sachs.
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"This was evident in the recent market correction, which brought commodities
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down roughly 10pc from their April highs. With prices now more inline with
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near-term fundamentals and price targets, we believe that the risk/reward once
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again favours being long commodities."
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## Related Articles
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* [FTSE today: market report as it happened: March 18, 2011][7]
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18 Mar 2011
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* [Shares and Markets: News, charts, data][8]
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23 Dec 2009
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* [FTSE 100 holds nerve as BT offsets ICAP fall][9]
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11 Nov 2010
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Writing on base metals, analysts thought that China's purchasing of copper
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could increase in coming months while on oil, Goldman reckoned the civil
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conflict in Libya could eventually push prices higher. They forecast that
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Brent crude could reach $120 a barrel by the end of 2011 and $130 a barrel
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within the next 12 months. Morgan Stanley is predicting similar levels.
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With Goldman's change of heart fuelling a recovery in mining shares, the
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market swung back into positive territory - the **FTSE 100** put on 22.52
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points to 5,858.41 and the **FTSE 250** advanced 63.09 points to 11,858.76.
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However, traders were worried about the sustainability of the rally, given
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ongoing concerns about the European debt crisis. "With this on the table the
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chance of a major downside move remains very real, and is currently
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undermining any strength offered by individual equities," said Will Hedden, a
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sales trader at IG Index.
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But, the day belonged to the bulls, with **Cairn Energy **leading the charge
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for much of the session, only to be displaced by Fresnillo. Not only was the
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oil exploration group buoyed by the rising price o foil, but it also announced
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a new drilling programme in Greenland. Cairn said it was to drill up to four
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further exploration wells, which lifted it up 16.6 to 435.8p.
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However, analysts at Matrix kept their "hold" rating, saying: "Cairn is at the
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start of a critical exploration campaign. The market will be looking for
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genuine encouragement this year to feel comfortable about the continuation of
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the high-cost campaign into 2012."
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Analysts at Evolution Securities added Cairn's shareholders are standing at a
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cross roads, with the prize being the wider implication of more barrels in the
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under-explored Greenland basin. But, the broker said the flip side is that if
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this summer's drilling campaign disappoints, Cairn will have "spent around a
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$1bn (£619m) for nothing".
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"So the question is do you take profits now and come back if there is success
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in Greenland?" said analysts.
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At the other end of the spectrum, **Marks & Spencer** gave up some gains after
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its recent strong performance as investors digested the high street retailer's
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full-year results. M&S slipped 11.4 to 385.6p despite posting a rise in
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profits as the chain pointed to a "challenging" trading environment. Other
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retailers followed M&S lower, with Primark-owner Associated British Foods
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shedding 11p to £10.67.
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Amongst the second-liners, **SuperGroup** eased 14p to £10.51 amid concerns
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about sales at the streetwear retailer. However, **Sports Direct International
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**surged 15.1 to 227½p as buyers piled into the sportswear retailer, which
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last month said sales were on the up.
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Back on the top tier, airlines and tour operators also continued to suffer
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from anxiety over the latest ash cloud after Iceland's Grimsvotn volcano blew
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ash in Britain's direction. **International Airlines Group** fell 4.2 to
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230.8p and **TUI Travel** was a ha'penny lower at 229.3p.
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Slipping back too were the banks, with **Lloyds Banking Group **shedding 1.13
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to 49.74p and **Royal Bank of Scotland** easing 0.44 to 40.44p. Investors were
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ruffled by a warning that credit rating agency, Moody's, may downgrade 14
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British lenders because regulators appear less willing to bail out banks in
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the future.
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Amongst the second-liners, **Pace** steamed ahead as Exane BNP Paribas awarded
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the maker of television set-top boxes a double upgrade, raising its rating to
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"outperform". Pace's shares have slid since it issued a profit warning earlier
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this month due to higher supply chain costs as a result of the Japanese
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earthquake.
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But, Exane analysts reckoned Pace should return to earnings growth in 2012.
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The broker also thought that Pace could attract attention from a predator,
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especially as its American foothold could be appealing to Korean players. Talk
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that Pace could already have attracted a suitor, as well as the upgrade,
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helped it tick up 4.6 to 102.8p.
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Rumours were also swirling that the **London Stock Exchange** (LSE) could see
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bid interest. Although the bourse is trying to seal a tie-up with TMX,
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operator of the Toronto stock exchange, there has been speculation that the
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LSE itself could fall prey to an acquirer. Yesterday, gossips said the
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exchange, which closed up 19 at 908p, could attract a bid of £15-£16 per
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share.
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**Victrex **claimed pole position after posting a 57pc jump in first-half
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profit to £48.3m and raising its interim dividend 25pc. The shares climbed
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108p to £15.09.
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[X][10] Share & bookmark
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[What are these?][11]
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* Share: [Share][10] [ ][12] [ ][13]
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[Tweet][14]
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http://www.telegraph.co.uk/finance/markets/marketreport/8534287/Commodities-
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rally-as-Goldman-goes-long.html
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Telegraph
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## [Market Report][15]
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* ### [Finance »][16]
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* ### [Markets »][17]
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* ### [Business Latest News »][18]
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* ### [FTSE 100 »][19]
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* ### [FTSE 100 »][20]
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External Links
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* ### [London Stock Exchange website][21]
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In finance
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[![FTSE 100: Global markets ? in graphs][22] ][23]
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### [This week on the global markets - in graphs][23]
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[![Top ten most valuable companies in the FTSE 100: in pictures][24] ][25]
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### [Top ten most valuable companies in the FTSE 100][25]
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[![Fantasy Fund Manager game][26]][27]
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### [Fantasy funds: keep track][27]
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[X][10] Share & bookmark
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[What are these?][11]
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Share:
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* [ ][10]
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* [ ][12]
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* [ ][13]
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* [Tweet][14]
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* Advertisement
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![][28]
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telegraphuk
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Please enable JavaScript to view the [comments powered by Disqus.][29] [blog
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