FTSE 100 movers: Gold diggers lose lustre as other miners rally
London's FTSE 100 continued to drift lower on Monday afternoon, despite a strong performance from its habitual basic resources backbone.
Investors continued to leave embattled Capita in droves, sending its shares back down towards the 10-year lows of 450p and below, after the outsourcer cut its full year guidance last week.
With gold trading at its lowest level in 10 months as higher oil prices raise inflation expectations and prospects for US rates increases, Polymetal, Fresnillo and Randgold were all in the red.
Russian gold miner Polymetal was the worst hit as it was also on the receiving end of a downgrade from analysts at RBC Capital Markets, who said were positive on the company and management but said "with increasing gold price volatility, high levels of 2017 capex and a higher FCF breakeven price than peers we downgrade to sector perform".
Sky’s share price also lost some of the gains from Friday announcement of a potential offer from 21st Century Fox, as analysts highlighted some of the potential obstacles to a takeover that failed when it was last attempted five years ago, including the new political climate, 'fit and proper' tests of directors and the shareholders' objections over the price.
Newspaper reports over the weekend and on Monday cited several institutional shareholders that criticised Sky's independent directors for rolling over and recommending the £18.5bn deal as it was seen as opportunistic in light of the post-Brexit decline in the shares and the pound.
ITV, which has surged on Friday as investors grew excited over further dealmaking the sector, retreated on Monday even though some analysts saw reasonable chances of a deal. Peel Hunt said there was a 50% chance ITV will be bought, arguing that it represents “once-in-a-lifetime media real estate", with others suggesting Virgin Media owner Liberty might be a buyer.
Banks were among the worst performers, giving up some of the gains seen in the last week or so, with HSBC leading the decliners.
"Political events in Italy and the future of Monte dei Paschi continue to dominate sentiment," said Michael Hewson at CMC Markets.
"Speculation has continued to abound as to the fate of Italy’s oldest bank which is one of the best performers on reports that Italian authorities will bailout the bank to protect client savings, in the event it is unable to scrape together the private finance it needs to stay afloat by the end of this month."
Marks & Spencer was on the front foot thanks to a boost from Bank of America Merrill Lynch, which upgraded the stock to ‘buy’ from ‘neutral’ and lifted the price target to 400p from 330p.
Merrill acknowledged challenges from a tough UK macroeconomic environment and longer-term issues such as an ageing customer base and largely US dollar sourced business, but said these were secondary to the group’s ability to drive positive like-for-like sales.
“While not blind to the challenges M&S faces, we believe consensus is too pessimistic on 2018 where we forecast positive LFLS in Clothing & Home (compared to consensus at -2%) as we believe easy prior year comparisons, an aggressive approach to pricing and a rejuvenated product range can all serve to support growth.”
FTSE 100 - Risers
BHP Billiton (BLT) 1,407.50p 3.87%
Royal Dutch Shell 'B' (RDSB) 2,237.50p 2.45%
Antofagasta (ANTO) 774.50p 2.38%
Royal Dutch Shell 'A' (RDSA) 2,137.00p 2.37%
Marks & Spencer Group (MKS) 344.50p 1.74%
BP (BP.) 483.75p 1.59%
Rio Tinto (RIO) 3,256.50p 1.02%
Severn Trent (SVT) 2,167.00p 0.93%
Paddy Power Betfair (PPB) 8,340.00p 0.72%
Morrison (Wm) Supermarkets (MRW) 226.30p 0.62%
FTSE 100 - Fallers
Capita (CPI) 459.40p -4.29%
Polymetal International (POLY) 752.00p -3.96%
Barratt Developments (BDEV) 452.20p -3.29%
ITV (ITV) 185.50p -3.13%
Croda International (CRDA) 3,093.00p -3.10%
Mondi (MNDI) 1,565.00p -2.86%
Taylor Wimpey (TW.) 150.00p -2.85%
HSBC Holdings (HSBA) 655.50p -2.72%
Persimmon (PSN) 1,670.00p -2.68%
Direct Line Insurance Group (DLG) 346.90p -2.53%