Markets rise on mining merger move

STOCK MARKETS rose yesterday, sending benchmark indexes toward six-month highs.

The news in early morning that China may increase its participation in the European Financial Stability Facility as well as the announcement of the proposed merger between mining giants Xstrata and Glencore boosted markets in early morning trade.

Markets were also buoyed by comments from Federal Reserve chairman Ben Bernanke that the US economy was improving.

DUBLIN

THE IRISH market ended the session fractionally lower, as a result underperforming relative to its European peers. The Central Bank’s announcement that it was cutting growth forecasts for the year may have weighed on sentiment.

Independent News & Media was the subject of significant investor interest, with around eight times the usual volume of shares traded. The buyer was most likely to be institutional buyer Marathon Asset Management, the fourth largest holder of stock in the company. INM closed down 2 per cent at €0.225.

Construction giant CRH was actively traded, boosted by signs of tentative improvement in the US economy, a key revenue driver for the company. Peer company Eagle Materials also posted positive results, a good sign for the stock. Nonetheless, CRH gave up some of its recent gains to drop around 1 per cent by the end of the session to close at €15.30.

Elsewhere small-cap stock Readymix remained unchanged at €0.19 after it said it expected a pre-tax loss of €54 million in 2011, after it takes an impairment charge of €39 million.

Smurfit Kappa rose 0.5 per cent to €6.35 ahead of full-year results next week.

LONDON

THE ANNOUNCEMENT yesterday that Glencore, the worlds largest publicly traded commodities supplier, is in talks with Xstrata to merge in a deal that would create an $80 billion rival to BHP Billiton, was the main focal point of the day, providing hope for further merger and acquisition activity.

Nonetheless, the FTSE 100 paused after recent sharp gains as a rally in mines on the prospects of the merger was counterbalanced by warnings from blue-chips of a tough year ahead.

The FTSE 100 finished 0.1 per cent, or 6.75 points, higher at 5,797.47, retreating from a six-month intra-day high of 5,809.82 after stumbling into resistance above the key 5,800 level.

Shares in Xstrata jumped 10 per cent to six-month highs, with trading volumes nearly three times their 90-day average.

Glencore added 7 per cent. The broad mining sector was up 3 per cent, also getting a boost from a bigger than expected fall in US weekly jobless claims.

London-listed consumer goods group Unilever led the FTSE 100 loser board after it warned that 2012 would be a difficult year. Shares in the soups and soaps maker fell 4.4 per cent.

AstraZeneca also warned investors of harder times ahead as patents on key drugs are due to run out, sending shares in the UK’s second-biggest drugmaker 3.4 per cent lower.

EUROPE

THE STOXX Europe 600 Index rose 0.2 per cent to 260.11 at the close for the gauges highest level since August 1st. The benchmark measure swung between gains and losses at least 20 times in morning trade, pointing to strong liquidity.

National benchmark indexes climbed in 14 of the 18 western- European markets. France’s CAC 40 Index gained 0.3 per cent and Germany’s DAX Index advanced 0.6 per cent.

The Xstrata-Glencore merger was the main news of the day, with Xstrata surging 9.9 per cent to 1,230.5 pence. Glencore added 7 per cent.

Novo Nordisk A/S rose 4.3 per cent to 709.50 kroner after the world’s largest insulin maker posted net income that climbed to 4.69 billion kroner from 3.95 billion kroner a year earlier.

Benetton surged 17 per cent to €4.74 after the Benetton family, the company’s largest shareholder, said it would offer €276.6 million for the shares it doesn’t already own in the company.

US

MOST US stocks rose as jobless claims dropped and Fed chairman Ben Bernanke said the economy was improving. Bernanke told lawmakers in Washington that while the world’s largest economy is still vulnerable to shocks, measures of spending, production and jobs have improved.

Commodities fell, while Treasuries and the dollar were little changed. Gauges of energy, technology and financial shares climbed at least 0.4 per cent to lead gains among the 10 main industry groups in the SP 500, while healthcare and consumer- discretionary stocks retreated.

MasterCard, the second-largest payments network, jumped 5.4 per cent after profits climbed 24 per cent. Qualcomm, the biggest maker of mobile phone chips, added 2.4 per cent after raising its sales and earnings targets. – (Additional Reporting: Reuters/Bloomberg)