Market Report: Miners falter as markets react to Chinese rate rise

The miners were on the back foot last night, with the likes of Kazakhmys and Antofagasta losing ground as commodity markets turned lower.

In a belated reaction to the recent Chinese interest rate rise, metals prices fell back, with benchmark copper on the London Metal Exchange easing to around $9,920 per tonne from a closing bid of $10,059 on the day before. Prices, which rose to a high of $10,160 per tonne earlier in the week, had managed to absorb the rate hike on Tuesday, but gave way on Wednesday as the US dollar strengthened and traders in Asia returned to their desks after a week-long holiday to mark the lunar new year.

The movements soon fed through to the equity markets, weighing on copper producers Kazakhmys, which was 53p behind at 1,569p, and Antofagasta, down 57p at 1,456p.

In the wider sector, the Eurasian Natural Resources Corporation was 17p lower at 1,012p, while Rio Tinto lost 53p to 4,659p as the market looked forward to its results, which are due this morning. Deutsche Bank analysts said they expected the Anglo Australian group to post record annual profits of more than $14bn.

Credit Suisse failed to lift sentiment around Vedanta Resources, the India-focused miner which lost 72p to 2,342p despite the broker reinstating coverage with an "outperform" view. The weakness comes as traders keep an eye out for news from India, where authorities are still considering whether or not to approve Vedanta's plans to acquire control of Cairn India's oil assets.

Overall, the weak trend in the heavily weighted mining sector and the pressure posed by a number of ex-dividend stocks conspired to erase any hope of gains on the FTSE 100, which was 39.04p down at 6,052.29. The FTSE 250 was also lower at 11,796.61, down 33.93 points, at the end of the day.

A number of large blue chips lost their payout attractions last night, including BP, which was down 8.05p at 476.45p after going ex-dividend, and Unilever, which ended the session at 1,823p, down 21p.

Reckitt Benckiser was among the weakest of the blue chips, slumping by more than 5 per cent or 175p to 3,270p, after missing quarterly earnings forecasts. The consumer goods giant posted 69p per share in fourth quarter earnings – well below hopes of more than 73p. Earlier, the stock touched a session low of 3,190p, down more than 7 per cent.

On the upside, Prudential enjoyed a firm afternoon, adding 16p to 731.5p after a push from Société Générale.

"With a high beta combined a defensive business profile (low government bond exposure, low interest rate exposure, high emerging market exposure), we view Prudential as a potential solid performer now with the recent market rally fading," the broker said, driving the mood around the insurer's stock.

Centrica, up 5.8p at 333.8p, was underpinned by some supportive comment from Morgan Stanley, whose analysts reiterated their "overweight" view on the British Gas owner's stock.

The broker raised its target for the shares to 390p, pinning the rise on a "thorough review of its divisions" that highlighted the extent to which the City was undervaluing its sector-leading growth prospects.

Morgan Stanley also directed attention to the strength of Centrica's balance sheet, which it said was "almost unique" in the utilities sector.

Elsewhere, the online grocer Ocado rallied by more than 7 per cent or 18.7p to 275p amid renewed talk of bid interest from WM Morrison Supermarkets, which was broadly unchanged at 279.1p, up 1p, as the market failed to warm to the idea. As in the past, short covering was seen as a more convincing cause of the gains, which have driven Ocado up by more than 50 per cent since the beginning of the year.

On the downside, the high-tech plastics firm Victrex was nearly 7 per cent or 96p lower at 1,320p after going ex-dividend. JP Morgan Cazenove also weighed in on Wednesday, lowering the stock to "neutral" from "overweight" on valuation grounds.

"The valuation of the shares... remains at a relatively elevated levels, and has settled towards the top end of the company's established trading range," the broker said, keeping its target price for the stock unchanged at 1,408p. "For now, therefore, and in the absence of major new trends, we believe that the shares are fairly valued at this stage."

Investors remained hungry for a piece of Domino's Pizza, the fast food group which rose by 10p to 546p after Numis raised hopes ahead of the firm's full-year results next week.

The broker said it expected the company, which has a habit of cheering the market with upbeat results, to post a 26 per cent rise in pre-tax profits to £37.7m thanks to factors such as strong growth in like for like sales and the addition of 57 new outlets. Numis also raised the possibility of share buy backs, highlighting the "substantial cash resource" of at least £20m.