Market Report: Analysts turn bid spotlight on to Anglo American

Anglo American came out of the M&A shadow imposed by many of its peers yesterday.

Miners such as Xstrata, Rio Tinto and BHP Billiton have long featured in the talk of the town for their potential as predators or as possible takeover targets. And the spotlight has been kind: Rio stock has gained 9.84 per cent while BHP and Xstrata have soared by almost 9 per cent over the past 12 months. In the same time, Anglo American shares have added 6.72 per cent.

Goldman Sachs is wary of the performance gap. "We see particularly high value in stocks in our coverage that have lagged in terms of performance and have undergone a sector relative de-rating versus stocks that have been involved in ongoing M&A transactions or speculation," the broker said.

Goldman upgraded Anglo American, giving it a place in its pan-European "conviction buy" list. It said: "We believe Anglo American has been overlooked by investors on the basis that it currently offers the most upside to fundamental fair value within the sector."

The assessment helped Anglo American climb by 125p to 3,287p.

The other miners maintained their strength. Xstrata added 160p to 3,867p, BHP gained 68p to 1,685p and Rio rose by 146p to 5,840p.

The housing sector was weak ahead of the Bank of England Monetary Policy Committee meeting on Thursday. Despite analyst forecasts of a 0.25 per cent reduction in the base interest rate to 5 per cent, a combination of nervousness and the effect of earlier negative broker comments kept housebuilders in the red. Persimmon was down 13p to 706p, Taylor Wimpey lost 4.25p of 177.5p, Barratt Developments shed 7p to 394.5p and Bovis Homes lost 5.5p to 584.5p. The property search website Rightmove was also off, down 18.5p to 469.75p.

Overall, the FTSE 100 gained 67.7, or 1.1 per cent, to 6,014.8. There was some cheer as the London benchmark swung, however tentatively, past the psychologically important 6,000-points mark.

In addition to the miners, the index was helped by a strong start on Wall Street, where traders were cheered by the prospect of a significant private equity investment in the Washington Mutual bank.

The FTSE 250 was also strong gaining 79.4, or 0.8 per cent, to 10,244.5.

On the FTSE 100, more bid talk boosted British Energy, which rose by 2.5p to 713.5p. Reports that British Gas owner Centrica may mount a joint bid for the company with the German rival RWE and EDF, the French state-controlled utility, reinforced the ardour of investors and traders. Market speculation had earlier mooted the idea of a British-led consortium, suggesting that Centrica, which rose 12.25p to 315.75p, was not financially equipped to make an offer by itself.

The real estate developer Hammerson was the subject of speculation suggesting a possible bid from Aldar, a Middle East-based property company. The talk was borne of weekend reports and followed earlier speculation about stake-building by a rival developer. The talk failed to lift the stock, which closed down 1p at 1,121p.

On the FTSE 250, Expro International was up 31p to 1,199p. The oil and gas well services provider was the focus of vague bid rumours suggesting it was soon to be subject to a bid from a rival. No name for the suitor was forthcoming, nor was there any indication about the price of the bid.

Hays, the recruitment specialist which is due to publish an update to the market later this week, slumped after the rival Michael Page issued a cautious outlook statement. Hays was down 7p to 111.75p, claiming first place on the FTSE 250 loser board. Michael Page, which was the second worst performing stock on the index, lost 16.25p to 288.75p.

ARM Holdings added 4.25p to 94.25p after Goldman Sachs upgraded the chip maker to "buy" from "neutral" in a new sector review. "On a relative basis, our positive bias is on stocks that we believe to be trading at or below our estimated 'trough' valuations, and we highlight ... ARM Holdings despite what will clearly be challenging fundamentals over the coming quarters," the broker said.

On AIM, GCM Resources lost 21p to 105.5p. Investor sentiment was hurt following worries about funding from the Asian Development Bank for the company's open-cast mine project in northern Bangladesh.

Xtract Energy shed 0.125p to 2.75p after Cambrian Mining said it may sell its stake in the company. The news came as Cambrian released the results of its strategic review, which also indicated that it would seek to acquire Coal International.

The developments took Cambrian's share price up by 42p, or 36.84 per cent, to 156p, while Coal International gained1.5p, or 3.9 per cent, to 40p.