Market Report: Fall in commodity prices takes the shine off Rio

Tumbling Commodity prices coupled with some very bearish comments from Deutsche Bank caused investors to exit Rio Tinto in a rush yesterday.

Tumbling Commodity prices coupled with some very bearish comments from Deutsche Bank caused investors to exit Rio Tinto in a rush yesterday. Shares in the mining giant lost 32p to 1,142p as the prices of gold, silver, copper and zinc slumped. Commodity speculators were reported to be booking profits from what have been soaring metals prices this year.

This is not good news for Rio and nor is a bearish stance on the stock from a City heavyweight such as Deutsche Bank. The German broker slashed its recommendation to "sell" from "hold" and warned that the company finds itself in a nasty bind when it comes to deciding whether it is to table a counter-bid for the Australian copper miner WMC.

Deutsche takes the view that Rio is damned if it does and damned if it doesn't bid. It believes that if the group successfully tops Xstrata's offer, and wins control of WMC, investors are likely to accuse the company of overpaying. On the other hand if Rio does not bid, Deutsche fears that Rio's management team will appear flat-footed and lacking in strategic direction.

Meanwhile, the group's London-listed rivals also had a disappointing day as a result of the slide in commodity prices. Xstrata lost 19.5p to 871.5p, BHP Billiton fell 12p to 572p and Anglo American dropped 20p to 1,185p.

British Land found itself at the opposite end of the blue-chip index, up 31p at 844p, thanks to an ultra bullish note from ABN Amro. "We believe that the stock will continue to show good gains over the next 12 months as the recovery in the occupational market and continuing strength of the investment market underpin the company's growth,"the Dutch broker said.

Tate & Lyle dropped 7.75p to 475p with ABN Amro heard to be trying to place a 10 per cent stake in the company on behalf an institutional client. The seller is said to be Capital Partners. Meanwhile, the sugar producer was confirmed as having won promotion to the FTSE 100 in place of Tomkins, up 1p to 250p.

William Hill added 12.5p to 545.5p amid relief that the House of Commons Standing Committee looking into the Gambling Bill has recommended no material changes to the proposed legislation as far as it concerns fixed-odds betting terminals (FOBT's). James Wheatcroft, an analyst at Investec Securities, said: "In the short term, the threat of changes to the permitted stakes or prizes of FOBT's has diminished but not evaporated."

Pursuit Dynamics improved 3.5p to 179.5p after the technology group announced that it has appointed Investec Securities as its broker. Gossips also talked of bullish news flowing from the company ahead of the new year. The company has a special type of technology for the food and drinks industry and recently boasted of a major licensing deal with Coca-Cola. Word has it Pursuit is close to a similar deal with Cadbury Schweppes.

NXT fell 1.5p to a new low for the year of 40p on worries that the company has been experiencing technical problems with one of its products. But, Bridgewell Securities, which is NXT's broker, poured cold water on the talk. "We have spoken to the company and it is clear that there are no such problems,"Bridgewell said. The broker believes that all is going to planat the audio speaker developer.

Imagination Technologies ticked 0.75p higher to 67p after unveiling a licensing deal for a number of products from its PowerVP IP stable. But Evolution Securities warned that Imagination needs a lot more than this deal if it is going to meet its full-year earnings forecasts. The broker also fears that the company may soon need extra cash: "If significant licence revenues are not achieved in the next year, we could well be looking at another fund raising," it said.

API, the packaging specialist, hit a new high of 107.5p, up 2.5p, as it disclosed the sale of its metallised paper division for £500,000. Numis Corporation added 10p to 717.5p on the back of another set of record results. Full-year profits at the stockbroker soared 50 per cent to £14m.

The exploration sector is again expected to produce the most exciting floats of the day. Equator Exploration is by far the biggest and today the oil group will raise £60m at 100p a share. The equity issue is believed to have been significantly oversubscribed and brokers tip the stock to close at a good premium to this level.

It is much the same story at Falkland Gold and Minerals. WH Ireland has raised £10m for the group, which has exploration rights in the Falkland Islands, at 40p. Given investors' appetite for the sector it too is forecast to have a good maiden session. Whether it finds a major gold or mineral deposit on the islands, only time will tell.