Market Report: Randgold weighed down by gold price weakness

The combination of bearish broker comment and weakness in the gold price weighed on Randgold Resources last night, with the mining group beginning the third quarter as one of the weakest of the blue chips.

The stock was 80p behind at 5,175p as gold prices slipped to their lowest levels in six weeks. The pullback came as reassurance on Greece's debt woes emboldened investors, who switched their attention to riskier options.

Gold tends to benefit in times of stress – but growing confidence in the eurozone's ability to deal with its debt issues triggered a reversal. The price was also held down by a strengthening dollar, with the yellow metal easing to around $1,483 (£923) an ounce in late-afternoon trading.

Adding pressure on Randgold, which runs mines in Mali and the Ivory Coast, was a new circular from Morgan Stanley, warning the stock was "priced for perfect execution".

"We believe Randgold's growth profile, sizeable reserves and management track record have warranted a premium valuation," Morgan Stanley said, commencing coverage of the stock with an "underweight" stance.

"However, we expect the execution risk profile to rise as it transitions to underground mining and highlights rising industry-wide taxation risks amid high commodity prices that have prompted some governments to consider imposing additional taxes," Morgan Stanley said.

Randgold underperformed Fresnillo, the Mexican silver miner, which was 3p behind at 1,399p. Sector peer African Barrick Gold bucked the trend among the precocious metal producers, closing safely in the black with a gain of more than 1 per cent or 6p to 420.3p.

Overall, optimism about Greece continued to power the FTSE 100, which gained 44.05 points to close at 5,989.76. The mid-caps were also in good form, with the FTSE 250 gaining 106.24 points to 12,040.28 last night. The news from the eurozone, coupled with some positive data out of the US, helped offset some grim economic figures from the UK and China.

Here, the latest Markit/Cips survey of manufacturing purchasing managers showed that the sector had expanded at its slowest pace in almost two years in June, triggering concerns about the strength of the domestic economic recovery. Supplementing that was the news that Chinese factory activity has also suffered a slowdown last month, growing at its weakest pace in 28 months.

On a more positive note, a new report from the widely followed Institute of Supply Management showed that US factory activity had advanced at a better-than-expected rate in June, offering hope for the world's largest economy.

Back with the day's movements and Lloyds, which shot up by nearly 10 per cent as investors welcomed the results of its annual review on Thursday, continued to gain ground, adding another 3.7 per cent or 1.81p to 50.8p amid continued optimism about the review and the news from Greece.

The move came even as some analysts struck a note of caution, with Credit Suisse saying that while it saw the announcement as a "supportive" one, "revenue targets are a stretch, implied capital levels appear lower and NAV [net asset value] does not change."

Elsewhere, Wood Group was 14.5p better off at 662p despite some weakness in the oil price after Goldman Sachs weighed in, arguing that the drivers for the oil services sector remained positive.

The broker said that, on its analysis, the industry, which was hit by the fallout of the Gulf of Mexico oil spill last year, continued to "screen as attractive" and went on to upgrade its recommendation on Wood to "buy" from "neutral", with a revised 808p target price, compared to 765p previously.

On the second tier, the defence group Qinetiq was in focus, rallying by a healthy 7 per cent or 8.4p to 129.1p amid bid speculation. The market rumour mill, which often swings into motion on quiet Friday afternoons, was abuzz with chatter about the possibility of interest from BAE Systems. Failing that, speculators said the company, which has endured a volatile few years, may have roused the interest of an unnamed American suitor.

London Stock Exchange, on the other hand, went the other way, easing by 28p to 1,033p as takeover speculation cooled down at the end of the week. Earlier, the market was flush with talk of the LSE ending up as a target after dropping its plans to merge with TMX. Nasdaq was reported to be weighing up the possibility late on Thursday, but that story did not appear to find much support during yesterday's session.

The engineering and design firm Hyder Consulting was held back, easing by 2p to 442p, after Panmure Gordon lowered the stock to "hold" from "buy". The change of heart was down to valuation, as the recent uptick in the Hyder share price has brought it well within the striking distance of Panmure's target price of 445p.

FTSE 100 Risers

Barclays 265.55p (up 9.1p, 3.6 per cent)

Banking sector cheered by optimism that Greece will be able to avoid a full-blown debt default.

Standard Chartered 1,672p (up 34p, 2.1 per cent)

Banking sector rises; positive broker comment from Citigroup.

MBG 1,427.5p (up 13.5p, 1 per cent)

Oil and gas group rises after UBS repeats its "buy" stance, ups its target price for the stock to 1,600p.

FTSE 100 Fallers

Next 2,300p (down 25p, 1.1 per cent)

Fashion retailer sells its thirdpart customer services arm Ventura to Capita.

Vodafone 164.1p (down 1.2p, 0.7 per cent)

Telecoms group agrees long-awaited deal to buy out India joint- venture partner Essar.

J Sainsbury 328.9p (down 0.5p, 0.2 per cent)

Supermarket group eases as the wider sector comes under pressure.

FTSE 250 Risers

JD Wetherspoon 442.3p (up 11p, 2.6 per cent)

UBS upgrades its stance on the pub group's stock to "buy" from "neutral".

Taylor Wimpey 38.88p (up 1.1p, 2.9 per cent)

House builder continues to draw steam from its trading update earlier this week.

Greene King 497.9p (up 10.5p, 2.2 per cent)

UBS upgrades its stance on the pub group's stock to "buy" from "neutral".

FTSE 250 Fallers

Premier Foods 17.08p (down 1.94p, 10.2 per cent)

Food producer continues to fall in the wake of Thursday's profit warning.

Carpetright 637p (down 14p, 2.2 per cent)

Retailer eases after the analysts at Singer Capital Markets cut their target price to 500p.

Hochschild Mining 451.6p (down 8p, 1.7 per cent)

Gold miner under pressure as gold prices hit lowest levels in six weeks.