The FTSE fell from a 56-week high this morning, after heavyweight mining shares retreated on the back of disappointing merger news.
Shares of Anglo American slid 2% to 2264p after Xstrata said it had no intention of making a £56 billion bid for its rival.
The announcement came after the Takeover Panel imposed a ‘put up or shut up’ deadline on Xstrata, with the deadline due to expire at 5pm on 20 October - Xstrata will not be allowed to make a bid for six months after this date, according to the Takeover Code.
‘Our decision not to proceed with an offer before the deadline imposed by the UK Takeover Panel reflects our disciplined approach to growth and our focus on the value proposition for Xstrata's shareholders in a merger,’ said Xstrata’s chief executive Mick Davis in a regulatory statement . ‘We continue to assess a range of alternative growth options, in full recognition that transactions of this nature often take time and patience to mature.’
Mr Davis said he still believes in the strategic rational of the merger with Anglo, yet remained confident in Xstrata’s standalone prospects as well.
Xstrata’s share price retreated 0.6% to 1025p. BHP Billiton fell 0.7% to 1829p, Rio Tinto declined 0.20% to 2992p while Randgold Resources slipped 0.6% to 4644p after the price of December gold futures fell 0.8% to $1056.2 per ounce.
Energy stocks were also lower, despite a rise in crude oil, which rose after the American Petroleum Institute unveiled falling stockpiles. The Energy Information Administration will release its inventory data at 4pm this afternoon.
Cairn Energy was the sector’s worst performer, down 1.1% to 3017p followed by Royal Dutch Shell, which declined 0.9% to 1850p and BG Group, which dropped 0.6% to 1137p. Tullow Oil, which said its Mahogany-4 well has discovered oil, also retreated, dropping 0.4% to 1238p.
Banks were mixed, with Lloyds Banking Group advancing 0.6% to 93.61p after wealth manager Rathbone Brothers confirmed that it is in talks with Lloyds about buying its Bank of Scotland wealth management assets. In the meantime, the FT reported that the UK government will not underwrite the bank’s planned rights issue.
Royal Bank of Scotland gained 0.93% to 48.78p while Barclays retreated 0.9% to 380.3p. HSBC and Standard Chartered fell 0.7% to 718.2p and 0.6% to 1591p respectively.
Elsewhere, luxury goods group Burberry rose 1.5% to 574p after JPMorgan raised its price target and lifted its full-year forecasts, following a first-half trading update on Wednesday.
In small cap news, biopharmaceutical company Oxford Biomedica soared 72% to 18.5p after confirming that its patients responded well to a second dose of its ProSavin Parkinson’s disease drug.
‘This project represents a significant step-change in technology,' analysts at Panmure Gordon said. The broker upgraded the company from ‘hold’ to 'buy' and raised its price target from 12p to 17p today.
By 10:30am (London time) the FTSE 100 Index was 9.53 points (-0.18%) to 5248.35 while the broader FTSE 250 Index was 12.77 points (-0.13%) below its previous close at 9528.56. In the meantime, the December Dow and S&P 500 futures both traded 0.10% higher.
It is important to note that there is a raft of economic and corporate data scheduled for release in the United States today.
The Consumer Price Index, an important inflationary gauge, jobless claims and Empire State manufacturing data will be published at 1:30pm (London time) followed by the Philadelphia Fed manufacturing survey at 3pm.
On the earnings front, Citigroup and Goldman Sachs will release their third-quarter earnings before the opening bell. Cypress Semiconductors, Fairchild Semiconductors, Advanced Micro Devices, IBM, Google and Novellus are also due to report their quarterly figures today.
