Britain's benchmark index lagged its European peers as the weak mining sector weighed on its progress yet again.
Under-pressure miner Anglo American was in the firing line for a second consecutive day, when Deutsche Bank downgraded its rating to “hold”. While other brokers have questioned the “radical” restructuring plan announced last week, the bank said it was concerned about “the lack of apparent urgency around it”.
According to Deutsche, analysts believe the FTSE 100 miner needs “closure on the past and to move on with the new, not another transition period over 18 months”. Analyst Anna Mulholland said the miner had been left with little choice but to dispose of more quality assets. The stock tumbled 14.7p, or 5.3pc, to 263.6p.
Commodity stocks were also hit by a fall in copper prices, which eased by around 1pc. Elsewhere, Credit Suisse lowered the target price of Glencore, owing the move to revisions it made to commodity price forecasts earlier in the week. Shares slipped 4.1pc to 80.9p. Its rivals Rio Tinto and BHP Billiton shed 2.1pc and 0.4pc, respectively.
On the wider market it was a sea of green, as global indices found confidence in the world’s biggest economy. The FTSE 100 rose 41.35 points, or 0.68pc, to 6,102.54. However, the index has only recouped 50pc of its losses since the early December sell-off, when 8pc was wiped off its value.
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Meanwhile, a slashed target price didn’t dampen the progress made by Standard Chartered shares in the wake of the historic US quarter-point interest rate rise. The London-listed bank has been hit heavily by its exposure to emerging market economies and the uncertainty surrounding the timing of the first Federal Reserve interest rate hike in almost a decade.
However, yesterday, the FTSE 100 stock enjoyed some light reprieve, along with its sector peers as banks generally make more money in a higher interest-rate environment. The bank was also lifted by its decision not to lift prime lending rates, even after Hong Kong’s central bank upped its base rate charge.
While investors cheered the emerging markets-focused Standard Chartered, analysts at Exane BNP Paribas cautioned that its risk-reward remained “unattractive”. The investment bank reduced its target price by 19pc to 500p, adding that it could see no basis to support a rating upgrade.
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With oil prices plunging to seven-year lows in recent days, Tom Rayner, an Exane BNP Paribas analyst, said: “We feel there is still too much uncertainty to support a positive investment stance.”
The global commodity price rout remains a serious concern for the bank, given it has $43bn (£29bn) of exposure. It also has $60bn exposure to mainland China, which is another cause for worry. Although the FTSE 100 bank has said 85pc of its exposure consists of products with maturities of one year or less, analysts believe China could still drive “material further impairments”.
Although markets appear euphoric following the action from the Fed, Mr Rayner warned: “Higher US interest rates are a potential catalyst for additional credit losses.” Analysts struggled to see how the bank can deliver “a sustained recovery in profitability”. None the less, a Fed lift-off relief rally helped Standard Chartered claim the FTSE 100 top spot, with shares 37.2p, or 7.3pc, higher to 549.9p.
Separately, a Reuters report attributed the bounce to the willingness of the bank’s top investor, Temasek, to give Standard Chartered further time to overhaul the business, before it decides whether or not to offload its $4bn stake.
South-African exposed stocks were also given a boost from the upbeat mood in financial markets. Anglo-African Old Mutual advanced 6.8p to 171.8p, while South African bank Investec rose 16½p to 469½p. Shares in Mondi, which owns a South African paper and packaging division, also jumped 36p to £13.45.
However, the rate hike pushed the price of gold as much as 2.7pc lower, near six-year lows of $1,047 per ounce. Shares in gold producers Randgold Resources and Fresnillo weakened by 3.5pc and 2.8pc, respectively.
Away from the Fed-induced rally, Inmarsat was among the top FTSE climbers – 45p higher at £11.30 – following a raised target price. So far this year the shares have risen 37pc, and analysts at Morgan Stanley believe satellite launches scheduled for next year could be a catalyst for further re-rating.
The investment bank revised its target price 320p higher to £14 to reflect the upside in aviation, through the aircraft connectivity market, and its fourth satellite due for launch in mid-2016.
On the other side, Berkeley Group was among the biggest laggards, down 172p to £35.85 as it was trading ex-dividend.
Chemicals maker Elementis suffered its worst day in six months, as shares slumped 15½p, or 6.5pc, to 221.2p. The group said full-year earnings per share would come in at the lower end of market expectations due to tough trading conditions. However, analysts at N+1 Singer remained confident that the imminent arrival of new boss Paul Waterman will “provide support ahead of market recovery”.
While challenging trading conditions persist for electronics distribution specialist, shares in Premier Farnell enjoyed a rare bounce – up 3pc to 94p – after it said full-year operating profit would be in line with its previous guidance.
Finally, shares in London Stock Exchange Group touched a record high of £27.09 after it said it enjoyed a good performance across each of its divisions this year.
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