London afternoon: Rio dives on Chinalco rumours

4th Jun 2009 14:27

Disappointment with the Bank of England's decision not to expand its quantitative easing programme prompted a downturn in the market, wiping out the morning's gains.London's blue-chip index is also struggling with the burden of a weak mining sector, which has moved further into the red after rumours broke that the deal between Rio Tinto and Chinese state-owned aluminium firm Chinalco is a dead duck. 'The Australian' newspaper is reporting that Rio Tinto has notified Chinalco that it wants to pull out of the deal, which would have seen Chinalco invest $19.5bn in return for a large chunk of shares. 'The Australian' newspaper also reports that Rio Tinto will, instead, look to form a joint venture with rival BHP Billiton, which last year abandoned a bid for Rio Tinto, with the two mining titans combining their iron ore interests. Elsewhere in the mining sector, Lonmin, which mines for the precious metal in South Africa, said it has received approximately 96.38% take up from its rights issue to raise $457m. Financias remain firm, however, with property stocks Liberty International, British Land and Hammerson and banking stocks Royal Bank of Scotland, Barclays and Lloyds Banking clawing back some of their recent losses.Retailers have been in the spotlight, with Wm. Morrison, Debenhams and WH Smith all making statements today. Wm Morrison edges higher after the supermarket made a good start to the new trading year, with sales growth well ahead of the sector norm. Like for like sales improved by 8.2%, or by 5.0% including fuel, maintaining the rate of LFL growth seen in the year to 1 February 2009. Sector peers Sainsbury and Tesco rise in sympathy with Morrison. Department store Debenhams is to raise £323m through a placing and open offer to reduce its debt burden and improve its ability to acquire retail assets that may arise if the economic downturn persists. It said its high debt levels had damaged investor sentiment towards the company, which has impacted its share price. The company had been widely expected to raise funds through a share issue, but with the price at which the shares are to be sold yet to be determined, the market has adopted a cautious stance and marked the shares lower. Newsagent WH Smith is also on the slide after said like-for-like sales in the first 13 weeks of the second half were down 4% on the same period last year, with total sales up 1%. The group said its financial position is in line with market expectations and its balance sheet remains strong as it continues to generate high levels of cash from its operations. PC World and Currys owner DSG International is wanted after receiving a strong response to its recently sharply discounted rights issue. Acceptances were received in respect of 97.1% of the shares on offer.Dairy Crest, the firm behind Cathedral cheese and Country Life butter, is bubbling higher after one of its competitors, Dairy Farmers of Britain, called in the receivers.Platinum refiner and car catalyst supplier Johnson Matthey saw profits for the year fall 5% and warned interim operating profit in the new year will be lower as the downturn in the car industry hits demand for auto-catalysts. Outsource giant Capita said it is in early discussions to the partial disposal of IBS OPENSystems after the Competition Commission deemed part of the business will lessen competition. The Competition Commission confirmed the acquisition by Capita of IBS last June is expected to lessen competition in the market for revenues and benefits software systems.Healthcare support services provider Synergy Health said it is on track to fully restore margins during autumn of this year. The company saw a 1.6% decline in operating margins in the year to 29 March 2009, caused mainly by rapid escalation of energy and commodity costs together with one off start-up costs incurred on new contracts in the Decontamination Services business. Budget airline easyJet posted a 1.8% rise in passengers in May as travellers continued taking advantage of low cost fares amid difficult economic conditions.IT services business FDM Group said it is currently in discussions with its management team, which may lead to an offer at 120p per share in cash.XXI Century Investments is selling off assets as it battles to meet debt repayment schedules. The company said that if adverse market conditions continue there is a real risk that the company will not be able to meet 'certain significant debt-related commitments, unless it succeeds in restructuring such payments as they become due.'IT and telecoms group Redstone suffers a double-digit percentage decline after it said trading since the second half has been slightly below expectations after cost reduction measures took longer than expected to implement and as market conditions remain extremely challenging.