Rio Tinto shares surge in lower London
FTSE 100 down 0.2%; Morrison Supermarkets, DSG International upgraded
By Sarah Turner, MarketWatch
LONDON (MarketWatch) -- Miners shone in London on Wednesday, as Rio Tinto shares shot up more than 10%, with gains from the sector helping to limit broader market losses.
Rio Tinto shares jumped 13.5% after announcing a slew of measures reflecting an urgent shift in its priorities toward conserving cash and lowering costs, as a deteriorating economic crisis and falling commodity prices begin to bite.
Citing the "unprecedented rapidity and severity of the global economic downturn," the Anglo-Australian company said it will slash as many as 14,000 job roles globally, including 8,500 contractors and 5,500 employee roles.
The company also said it will pare net debt by $10 billion by the end of 2009 and lower "controllable operating costs" by at least $2.5 billion a year in 2010. See full story.
"Today's announcement that Rio Tinto will reduce its net debt by $10 billion by the end of 2009 is a welcome relief to the uncertainty hovering over the company's head since the withdrawal of BHP Billiton's bid two weeks ago," noted analysts at Evolution Securities.
Paul Singer, analyst at Barclays Wealth, noted that Rio Tinto's comment that it has no need to raise equity will come as a relief to the market.
Other companies in the sector were also doing well, with Xstrata up 6.1% and Vedanta Resources up 6.2%.
Gold futures were up $13.20 to $787.40 an ounce in electronic trading.
Overall, the U.K. FTSE 100 index fell 0.2%, or 7.39 points, to 4,373.87, ending this week's run of gains.
Other European shares were mixed, while U.S. stock futures traded higher after reports that the Bush administration and Congressional Democrats agreed in principle late Tuesday on a rescue plan for the big U.S. automakers. See Europe Markets.
Banks were under pressure, with HSBC Holdings down 1.6%, Royal Bank of Scotland down 2.4% and Barclays down 2.8%.
Other financials were also lower, with hedge fund manager 3i Group down 9.5% and insurer Standard Life down 4%.
Retailers mixed
Retailers were mixed, with clothing store operator Next down 3.9% and department store operator Marks & Spencer down 4.5%.
Morgan Stanley analysts commented in a note out Wednesday that Christmas is shaping up to be the worst in many years for general U.K. retailers and recommends a cautious position in January.
Still, supermarket group William Morrison climbed 4% after it was upgraded to overweight from neutral at J.P. Morgan.
The broker said it believes the supermarket could grow comparable sales by between 8% and 10% over the Christmas period.
"From a perfectly commendable level of sales growth in October, Morrison has accelerated its underlying sales growth to 8.8% in November," the broker said.
Shares in DSG International , which sells electrical products, jumped 13.7% after an upgrade to buy from neutral at Nomura.
"DSG is priced to fail, in our view. We believe the probability of this is overrated," the broker said.
Meanwhile, shares in support services and construction group Carillion shot up 12.6%.
It expects underlying earnings per share for 2008 to grow around 15% compared to the previous year, helped by a strong trading performance and a lower effective tax rate. The earnings performance is around 5% ahead of previous expectations, the firm said.
Shares in pub company Marston's rose 2.4%. It said that it will be able to extend its bank facility to August 2013.
However, shares in Ladbrokes fell 5%.
The bookmaker said Peter Erskine will takeover as its chairman in May. Erskine will replace Ian Robinson who will step down from the board.
