Market Report: Brazilian talks add to Glencore’s allure

Commodity and mining giant Glencore Xstrata is constantly on the lookout for new assets to add to its coffers and the City bought into news yesterday it was in talks with Brazil’s Vale over a nickel mine joint venture.

Investors have long waited for a tie up of the nickel operations at Canada’s Sudbury basin but signs that the talks are back on boosted the stock.

Back in 2006 there was a proposed merger of Sudbury’s Falconbridge and Inco – assets then owned by other entities. Since then Vale and Glencore Xstrata have taken over the operations and have now begun talks.

The potential deal is thought to include discussions about how the pair would team up on mining, smelting and processing operations in the area.

Reuters reported news of the talks and shares surged 9.25p to 335.9p – close to the top of the table.

Glencore was also named as one of the leading parties in investigating alternative export routes for oil out of Kazakhstan.

As Glencore jumped up, much of the City was transfixed on Royal Mail as it closed at 455p, up from its float price of 330p.

But the wider market was gaining steam as traders were hopeful for a conclusion to solve the US debt default and shutdown. The FTSE 100 collected points to 6,473.56 after gaining 1.46 per cent on Thursday.

David Madden, market analyst at spreadbetter IG , said: “Traders hold high hopes over the US debt ceiling. Hopes that the Democrats and Republicans might come to a short-term solution to avoid defaulting on the country’s debts pushed equities up. Stocks are set to finish higher on the week as the Yellen nomination (to be chairman of the Federal Reserve) and the compromise by the Republicans have driven demand.”

Lloyds Banking Group has agreed to sell its remaining Australian operations to Westpac banking – part of its plan to concentrate on the UK market and reduce its overseas exposure. The shares were 1.1p better at 76.02p.

Spirits giant Diageo was one of the gainers on the blue-chip index as the Smirnoff vodka to Guinness group got an upgrade from analysts at Exane BNP Paribas. They raised it to outperform and shares gulped 52p higher to 1,973p. Ahead of its first-quarter results next week, analysts at Berenberg rated Diageo, which hired model David Gandy as the face of its Johnnie Walker Blue Label whisky, a buy and said it expects the group to report significant growth despite tough comparable periods.

Hotels-to-coffee shop chain Whitbread received more upgrades after two from analysts on Thursday. The latest backing came from Citi which upgraded it to buy and the group checked out another 96p to 3,210p.

Over on the mid-tier table, defence group Chemring tumbled 64.4p to 220p – right to the bottom of the table – after it said ongoing problems at its factory in Kilgore, Texas would hit profits this year and next.

West African-focused gold miner Avocet Mining’s feasibility study showed its Guinea gold prospect Tri-K to be “low cost and financially robust”.

However, analysts at Sanlam Securities said: “financing it will be tricky, unless it finds an investor who is attracted by the bigger prize”. The small-cap miner fell 1.25p to 14.75p.

Irish-based but African-focused miner Kenmare Resources raised £66.33m after weak mineral and metal prices and lower production caused a funding squeeze. It placed 250,300,000 shares at 26.5p each but edged back 3.39p to 25.7p.

Brothers Adam and Sam Kaye have raised £2.5m to ramp up the expansion of their new chains Dim T and Wildwood pizzerias. The Kayes are restaurant royalty in London. They founded Italian chains Ask and Zizzi and are involved with Prezzo. Their father opened the Golden Egg café chain in the Sixties and then Garfunkel’s and Deep Pan Pizza during the Eighties.

The Kayes’ Aim-listed group Tasty placed 2.51 million new shares which will start trading on 18 October. After the placing and the exercising of options to buy shares from directors, Tasty joint chief executives Jonny Plant and Sam Kaye will have 7.93 per cent and 18.31 per cent each in the company respectively, while Adam Kaye will have 15 per cent. Tasty edged up 2p to 106p.

Europa Oil and Gas spurted up 0.375p to 8.75p after it reported in-line with expectations final results and detailed drilling campaigns in the UK, France and offshore Ireland.

Buy

WH Smith

Snap up shares in WH Smith, Cantor Fitzgerald advises. The broker likes the stationers’ double-digit earnings per share growth and says the stock has “an impressive track record” and its rating is low “relative to the sector” so it gives the shares a 950p target which are currently 905.5p.

Sell

Aggreko

Flog shares in Aggreko, Canaccord Genuity’s analysts insists. The broker warns that the temporary power supplier could be losing market share to rivals. It is concerned about “pricing pressure and currency headwinds” and some of its existing contracts to lease temporary power are coming to an end. So they rate it a sell with a 1237p price target for shares that are 1,477p.

Hold

bwin.party Digital Entertainment

Hang on to shares in bwin.party Digital Entertainment, Citi concludes. The broker rates the online-betting group neutral because its launch in New Jersey is already factored into the price. There is also a risk if rival Pokerstars secures a license there, so it give the shares, which are 122p, a 120p price target.