Metal prices see miners shine

XSTRATA kick-started a recovery in the mining sector yesterday as it restored dividend payments after 19 months without a cash return to shareholders.

The Anglo-Swiss company said it was encouraged by the prospects of recovering demand from China, where a slowdown led to a 41 per cent drop in its profits for 2009.

Shares closed up 33.8p, or 3.6 per cent, at 983.8p as base metal prices climbed, boosted by predictions of strong economic growth in China.

South African gold mining company Randgold Resources also surged, after announcing that profits were up by almost 80 per cent in 2009 on surging demand for the precious metal.

Shares leapt 271p, or 6.4 per cent, to 4,480p after the company predicted a sharp rise in its reserves. Fresnillo was also among the top gainers in the FTSE 100, rising 5.3 per cent to 705p.

The wider FTSE 100 index enjoyed a mixed session, rising 60 points in early trade before dropping heavily later – at one point the index was down 30 points, on fears over European debt levels.

But a strong start to trading in New York saw the UK's benchmark index close up 31.41 points at 5,092.33.

Financial companies were the main drag, over concerns about exposure to troubled European economies, in particular Spain and Greece.

Most of Britain's banks ended the session lower, with Lloyds Banking Group the worst hit, closing 2.3 per cent off at 47.2p.

Insurers also had a bad day. Legal & General was the biggest faller in the FTSE 100, down 2.6p to 71.05p, while Aviva was down 9.4p to 355.7p and Prudential dropped 14p to 560.5p.

One of the few financial companies to climb was Icap, the interdealer broker, which made up some ground following Friday's 19 per cent fall.

Credit Suisse said last week's falls, sparked by a profit warning, were "overdone" as it slapped an "outperform" rating on the firm's shares. Bank of America Merrill Lynch cut its target price on Icap but reiterated its "buy" rating.

Shares in Icap were ahead for the entire session, closing up 9.7p, or 3.3 per cent, at 303.7p.

Drug giant GlaxoSmithKline rose 1.1 per cent to 1,219p despite its shares trading without the rights to its latest dividend for the first time. On a strong day for the defensive pharmaceutical sector, Astrazeneca jumped 48p to 2,780p.

Oil heavyweight Royal Dutch Shell also turned ex-dividend, but shares still rose strongly, up 24.5p to 1,680p.

However, other oil companies dropped as crude hovered around $71 a barrel. BG Group slid 17.5p to 1094.5p, despite Goldman Sachs raising its price target, while Scottish explorer Cairn Energy dropped 3.3p to 318.3p.

Among the midcaps, Weir Group fell 15p to 745p despite analysts at Evolution upping their rating on the group from "neutral" to "add" and increasing the target price on the Glasgow company by 50p to 875p.

But Melrose Resources, the Edinburgh-based oil explorer, continued to rise following Friday's announcement of a substantial gas discovery in Egypt. Shares closed up 3p, or 1 per cent, at 303p.

Wolfson Microelectronics dipped 0.5p to 119.5p ahead of the semiconductor company's 2009 results presentation today. The Edinburgh-based firm is expected to announce its first full-year loss since prior to its 2003 flotation. The City will be looking for evidence of design wins and whether Wolfson has been conserving cash.

On Aim, Sovereign, the debt-laden oil services company, dropped 0.5p to 2.75p as investors wait to hear about its crunch talks with bankers, which may lead to a debt-for-equity swap.