Market Report: Fresnillo left behind as miners march on

A Mexican silver and gold miner got buried at the bottom of the blue chips yesterday, despite the rest of the market piling in to diggers on signs that China is powering ahead. Fresnillo tumbled more than 2 per cent as analysts at UBS said it was looking “expensive” at its current level.

The precious metal miner climbed more than 20 per cent in August, but with an uncertain gold price it looked overvalued. They downgraded their view to neutral, down from buy.

Fresnillo lost 28p to 1,275p but UBS also pointed out that it could still be worth a buy if there were a “material upside to gold and silver prices”. Gold fell 17 per cent earlier this year, but last week reached a three-month high as investors looked for a safe haven amid fears of military action in Syria. With the military action on hold, gold eased back yesterday.

As Fresnillo fell the rest of the diggers surged on strong manufacturing figures from China – the best in 16 months. Rio Tinto added 122p to 3,035p and Anglo American was 57.5p better at 1,536p.

Better Chinese economic data was joined by improved eurozone stats and the benchmark index advanced to a two and a half week high on a mixture of better data, fears on Syrian military action easing and hopes that the US markets will rise today.

Traders banked on Wall Street rivals adhering to the American adage “Sell in May and go away, don’t come back until Labor Day.”

As the US enjoyed its holiday yesterday, punters invested in London shares on hopes that markets across the Atlantic might be on the rise by today.

David Linton, technical analyst and founder of Updata, said: “London might be pre-empting Wall Street’s return tomorrow. In terms of where next, I would expect the Footsie to have a good run up to the end of the year now.

“The long-term big picture is that markets are poised to enjoy a run such as we saw in the late 1980s.”

But Updata said the key level is at 6,750 points but it has so far struggled to sustain a break past this level this year.

The sale by Vodafone of its 45 per cent stake in Verizon Wireless in the US also added to the optimism and it dialled up a 6.95p gain to 213.2p. Confirmation of the details of the deal came after the markets closed.

Serco, the contractor running the Boris bikes scheme and the Docklands Light Railway, has been hit by concerns after it called in police to examine irregularities in records kept for its £285m prisoner-escorting contract. Its position toward the bottom of the benchmark index last week meant it is in danger of demotion in the Footsie quarterly reshuffle next week. But analysts at Jefferies claimed it is oversold and rated it a buy, although they reduced their price target to 675p. It was unmoved at 547.5p.

The mid-cap pizza delivery group Domino’s Pizza gobbled up 18p to 584p when it got a boost from analysts at Citi, who think its international prospects are a reason to tuck in to the stock. Citi argued the Domino’s franchise model can offer “impressive returns, shared risk and good growth” and its expansion into Germany shouldn’t be underestimated. Concerns about the German business are exaggerated, they said, and its model has “already proven a success in the UK, despite taking many years for the market to recognise it”; and there are “similarities with the current entry into Germany” which has been “missed by the market”. They rate it a buy with a 675p price target.

The 130p-per-share bid deadline for the luxury car business HR Owen by Berjaya Philippines – the investment vehicle of the Malaysian billionaire and Cardiff City Football Club-owner Vincent Tan – has got an extension.

Berjaya Philippines now owns or has got the go-ahead from shareholders totalling 30.19 per cent of the current issued share capital of HR Owen. It now has until 16 September to convince other shareholders. HR Owen was unmoved at 145p.

Internet domain name registry service CentralNic listed on Aim yesterday at 55p after raising £7m. It was 10.5p better at 65.5p.

Big data software specialist WANdisco ticked up 55p to 1,105p; it confirmed that Paul Harrison – formerly of Sage Group – joined as chief financial officer to replace its finance boss Nicholas Parker.

Buy: Circle Oil

Snap up Circle Oil, Investec insists. The broker thinks the oil explorer’s half-year results yesterday were good and leaves it with a “solid platform to drive further growth”, with expansion planned in Morocco and Tunisia. Investec gives the shares, which closed at 18.25p, a 68p price target.

Sell: Peotrpavlovsk

Flog Petropavlovsk, Citi suggests. The broker has re-evaluated its view on the gold miner’s iron-ore assets and is concerned about it sustaining cash flow. Citi’s analysts approve of its cost-cutting steps since the gold price fall but reduced their target price on the shares to 58p. They ended at 97.5p.

Hold: Computacenter

Hang on to Computacenter, JP Morgan advises. The broker thinks the technology specialist’s half-year results were in line with expectations and its outlook was positive. JP Morgan’s scribblers admit its supply chain was weak but the higher-margin services business was growing, so they rate the shares, currently 515p, neutral.