By Sarah Turner
LONDON (Dow Jones)--Rio Tinto led the mining sector lower in a
choppy London session on Thursday on fears it may need to make a
giant-sized equity offering.
The U.K. FTSE 100 index closed 0.1% higher to 4,386.94. Other
European equity markets were also muted.
Stocks showed little reaction to news that Bank of England
policy makers, as expected, left the key lending rate unchanged at
0.5% on Thursday and offered no further adjustment to their 125
billion pound ($205 billion) plan to purchase government bonds and
other assets.
Losses from mineral extractors kept a lid on gains in the main
index, with BHP Billiton (BHP) shares down 2.5% and Vedanta
Resources down 3.5%.
Rio Tinto (RTP) shares fell 6.6%.
The firm said it's pursuing a range of options to improve its
capital position, lending weight to earlier reports that a $19.5
billion deal with Aluminum Corp. of China could be about to
collapse.
Should that deal collapse, expectations are that the company
will issue discounted shares to existing holders, otherwise known
as a rights issue. Published reports indicated the size of the
offering could be as much as $15 billion.
Precious metals and chemicals firm Johnson Matthey declined
2%.
Fiscal-year net profit slipped to 173.9 million pounds, from
185.4 million pounds a year ago, after it took charges related to
restructuring and amortization. The credit crunch and global
recession have significantly reduced demand in a number of markets,
it said, and it's expecting first-half profit to be lower than last
year's.
However, shares of BP (BP) climbed 1% in the oil sector after
Exane BNP Paribas upgraded the firm to outperform from neutral.
With oil at $67 a barrel compared with the broker's 2009
forecast of $45.50 a barrel, Exane BNP Paribas said it decided to
add leverage to its defensive portfolio.
"A compelling, safe dividend yield, attractive 14% upside to the
target price, healthy near-term volume growth and cost reductions
make this the right entry point," the broker said.
Oil futures were up $2.42 at $68.53 a barrel.
Goldman Sachs lifted its target on light sweet crude oil to $75
a barrel from $52. "The recent rally in WTI prices is likely to be
but the first stage in the oil price rally that we expect will
accompany a recovery in economic activity," the broker said.
Supermarkets in focus
Shares of J Sainsbury advanced 1.7% after it was upgraded to
overweight from equal-weight at Morgan Stanley.
The broker said the supermarket chain will deliver premium
comparable-sales growth for at least the next 12 months, driven by
improved consumer-price perception.
Should Sainsbury be able to close the around 15% sales density
gap with rivals like Tesco and the Asda unit of Wal-Mart Stores,
(WMT), its earnings per share could rise to more than 50 pence by
fiscal 2012-2013, the broker said.
Tesco shares were up 2.1%.
Another British supermarket chain, William Morrison, climbed
2.6%. It said that comparable sales rose 7.3% excluding fuel and
3.5% including fuel in the 13 weeks to May 3.
Outside the FTSE 100, shares of Signet Jewelers (SIG) jumped
4.5%.
First-quarter net income rose to $26.3 million, from $25.7
million at the same point a year ago. Sales at the world's largest
specialty retail jeweler declined to $762.6 million, from $822.5
million.
"We have had a good start to the year reflecting the impact of
our operational initiatives, and have made significant progress
towards achieving our financial objectives for fiscal 2010," said
CEO Terry Burman
Shares of department-store-chain operator Debenhams declined
2.4
It will issue shares to raise 323 million pounds ($526.3
million) and proceeds will be used to reduce net debt, amend debt
covenants, increase flexibility to buy back debt and improve its
ability to pursue acquisitions.
Separately, the firm said that comparable sales for the 12 weeks
to May 28 slipped 0.8%.
Services Desk; Dow Jones Newswires; +44-20-7842-9319/9274