Market Report: Xstrata driven higher on hope of Brazilian deal

Weak sentiment made for a weak market yesterday as miners and housebuilders pulled down the FTSE 100 index of leading shares. Xstrata, the mining giant led by Mick Davies which some in the market expect to be taken over by Vale, was the only exception to the rule. Although some traders remain uncertain about the prospect, citing deteriorating credit market conditions and reports about objections from the Brazilian government as likely obstacles to any deal, rumours about a final announcement later this week helped push the stock to 3,512p, up 12p or 0.34 per cent. Its sector counterpart Anglo American, on the other hand, went south, closing down 125p, or 4.83 per cent, at 2,465p. Rio Tinto also followed the trend, down 3.13 per cent or 147p to 4549p at the close.

In the property sector, the housebuilder Taylor Wimpey was the biggest loser as a new home track survey revealed that UK house prices fell for the fourth month in a row in January. The company's share price was 5.22 per cent lighter by closing time, down 10.10p to 183.3p. Persimmon, another housebuilder, was down 4.3 per cent, or 35.50p, to 790.5p. Others exposed to a slowdown in the property market, including Wolseley, the construction company, which lost 29.5p, or 4.04 per cent, to close at 700p, and Hammerson, the commercial property company, which lost 2.36 per cent, or 27p, to close at 1,115p, were also down.

The market was also unkind to banking stocks as investors continued to worry about more damaging disclosures. Royal Bank of Scotland was down 2.37 per cent, or 9.25p, at 381.75p, while Alliance and Leicester, which was downgraded to "sell" by analysts at Dresdner Kleinwort, was down 1.49 per cent, or 11p, to 725p. Standard Chartered bank was also down, to 1,641p, lighter by 50p, or 2.96 per cent.

Elsewhere, rumours about the drug giant Glaxo-SmithKline and Genmab, a drug company listed in Denmark, did not have much effect on London. Speculation that GSK may bid for Genmab did boost the latter's stock, but the British company closed flat, at 1,189p.

Shire Pharmaceuticals was also in the news. The prescription drug company saw its stock fall 43.5p to 946.5p after Seymour Pierce lowered its rating on the stock to "underperform" from "market perform".

BAE Systems, meanwhile, was in the top ten risers on the FTSE 100. The defence services group gained after announcing that it had been chosen to lead a UK government drive to improve the purchasing of high-tech military software. BAE shares closed up 1.12per cent, or 5.25p, at 473.25p.

Phoenix IT also gained after issuing what analysts at Panmure Gordon thought was a positive trading statement. The company said that sales had maintained momentum, with group revenue for the third quarter up by 90 per cent and like-for-like revenues up by 16 per cent. Phoenix shares closed up 2.05 per cent, or 5p, at 249p.

Northern Foods was one of the biggest winners among smaller shares yesterday. The company, which makes the Goodfella's brand frozen pizza, saw its stock climb up to third place in the FTSE 250 leaderboard – up 4p to 96.5p – after brokers at Goldman Sachs, while maintaining their price target of 109p, told investors to "buy" the stock.

Shares in Carpetright, the specialist carpet retailer, and Croda, the chemical company, also gained from some benign broker news. Deutsche Bank helped push Carpetright's share price up by 2.43 per cent, or 19p, to 800p after announcing a revision in its recommendation, from hold to buy, while Croda's stock rose by 8.25p, or 1.77 per cent, to 474.75p after Collins Stewart initiated coverage of the shares, telling investors to buy and setting a target price of 628p.

Of the small caps at the sharp end of the market, Maxima, the software services company, saw its stock decline by 39 per cent, or 93p, to 147p after it said that full-year results would be below market expectations. The news prompted brokers at Seymour Pierce to revise their stance on the shares, cutting their rating from "buy" to "underperform".

On AIM, shares in CustomVis, which develops lasers for eye surgery, were up after a positive trading update yesterday. The company said it was on track to meet its second-half sales targets after increased interest from European surgeons and international distributors. The stock closed up 12.5 per cent, or 0.5p, at 4.5p.

Amino Technologies also had a good day yesterday. The company posted final results which were ahead of what some in the market expected. Analysts at KBC Peel Hunt also helped the stock, calling Amino "one of the most successful companies" within the IPTV market". At the close, Amino's share price was up 3.75p, or 7.58 per cent, at 53.25p.