Shares in Chilean miner Antofagasta enjoyed an impressive turnaround, reversing its position from FTSE laggard to leader, in a matter of hours after Goldman Sachs upgraded the stock.
Despite copper prices touching six-year lows in recent days and the current depressed share price of the miner, Goldman Sachs revised its rating upwards from “sell” to “neutral”, as it believes the risk-reward for the stock is now “balanced”.
So far this year the stock has plunged 36pc, and analysts at the bank attributed its torrid performance to operational issues at its mines in Chile, a slump in copper prices, and a rich price paid for the 50pc stake in the Zaldivar mine.
Although operational issues at its mines have yet to be fully resolved, Goldman Sachs remains confidence investors preference in the mining sector will most likely be skewed towards “balance sheet strength” over the near-term. Eugene King, of Goldman Sachs, boasted Antofagasta has “still one of the most robust balance sheets” within their coverage.
The weakness in metal prices had prompted shares to fall 1.4pc in early trade. However, the stock bounced back, closing up 27.6p, or 5.8pc, at 500p. The bullish note helped pulled the entire sector out of the red, with Glencore up 5pc to 93.3p, Anglo American 4.3pc higher at 449.5p, and Rio Tinto rose 2.1pc to £22.61.
On the wider market, the FTSE 100 swung between gains and losses amid renewed concerns about international security following a shootout in the Parisian suburb of St Denis between French police and militants suspected of involvement in the Paris attacks last Friday.
Mike van Dulken, of Accendo Markets, said: “Further terror alerts have also muted sentiment with the Germany-Netherlands football match in Hannover cancelled and two flights from the US to France being diverted after security alerts.”
British Airways owner IAG fell 3.1pc to 573p, while low cost carrier easyJet slipped 0.9pc to £16.94. InterContinental Hotels also tumbled 1.4pc to £24.65, while cruise operator Carnival slipped 1.4pc to £34.
However, in afternoon trade, the blue chip index inched higher to close in positive territory - up 10.21 points, or 0.16pc, to 6,278.97 - as attention turned to the Federal Open Market Committee minutes from the October meeting.
IAG four-day graph (Source: Bloomberg)
Defence stock BAE Systems continued its upward trend, buoyed by the French military response to Friday’s events. Analysts at Berenberg said: “Security tensions have escalated sharply, and as western leaders begin to demonstrate a shift in posture we expect continued strengthening of sentiment for the defence sector, underpinned by a hardening of defence policies.” The FTSE 100 stock rose 2.8p to 476.6p.
Meanwhile, engine maker Rolls-Royce fell into negative territory for the first time since the attacks, after broker Investec slashed its target price - down 12p to 543p. Rami Myerson, of Investec, believes Rolls’ profit warning last week is unlikely to be its last, as he pointed to short and medium-term risk from a series of strategic, end market and accounting headwinds.
Elsewhere, after dominating the FTSE 100 top spot on Tuesday, engineer Smiths Group became one of the biggest laggards. Despite announcing a material change in its pension fund structure, RBC Capital Markets and Societe Generale lowered its target price. Andrew Carter, of RBC, cautioned investors about the “significant uncertainty” which surrounds the group’s oil and gas end markets. Shares tumbled 30.5p to 989.5p.
On the other side, Hikma Pharmaceuticals climbed higher after overcoming concerns raised by the Food and Drug Association last year over environmental monitoring issues at its plant in Portugal. JPMorgan Cazenove also reiterated the group’s £25 target price to reflect “a very strong long-term growth outlook”. The stock jumped 95p, or 4.9pc, to £20.48.
On the mid-cap index, Hunting claimed the top spot after Goldman Sachs added the stock to its “conviction list” and reiterated its “buy” rating. The investment bank believes its current valuation offers “a very good buying opportunity”. Analysts said they expect revenue growth and margin expansion to start from the second half of next year when they think US onshore drilling activity will pick up. The FTSE 250 stock advanced 33p, or 10.5pc, to 348p.
Meanwhile, an update on Playtech’s acquisition of Plus 500 weighed on the stock - down 1.4pc to 861.5p - after it said it expects a decision from the Financial Conduct Authority in relation to the acquisition in December. The deal was expected to completed by the end of September.
Shares in NewRiver Retail ticked 2.8pc higher to 344.5p following a robust set of interim results, which saw pre-tax profits soar 217pc to £39m. The property developer also said it remains on track to move to the London Stock Exchange’s main market next year.
Finally, ahead of its admission to trading on Aim next Monday, Be Heard Group, formerly Mithril Capital, is raising £5.5m in equity funding. Property entrepreneur and investor Nigel Wray is taking a 10pc stake in the business. The announcement comes after it completed the proposed acquisition of media group Agenda 21 Digital.
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