MARKET REPORT: Alcoa in a solid start to the season

By GEOFF FOSTER FOR MAILONLINE
Updated: 05:25 EST, 9 October 2009

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Make no mistake about it, dealers expect the third-quarter earnings and forecasts that come out of Wall Street in the coming weeks to have a big influence on the market's direction through to the end of the year.

Major US conglomerates largely beat modest earnings forecasts in the second quarter by cutting costs and streamlining operations. For the third quarter, analysts and investors will be looking for actual growth in revenue and sales to provide more evidence of economic recovery.

Aluminium giant Alcoa, first of the Dow's 30 constituents to report, got the season off to a storming start late on Wednesday. With number crunchers forecasting a third-quarter loss, it reported a third-quarter profit helped by climbing metal prices and job cuts.

High fashion: Burberry share price rose as Nomura advised clients to buy ahead of Wednesday's second-quarter trading statement

Mining buffs were buoyant as Alcoa's performance, a record gold price of $1,055.60, or £676 an ounce, and further good gains in other precious metals as the dollar weakened, helped the sector drive the Footsie higher. It rallied 45.74 points to 5,154.64, while the FTSE 250 advanced 147.09 points to 9,373.44.

Wall Street put on 60 points at the outset, additionally helped by a drop in US jobless claims and some upbeat sales reports from top retailers, including Abercrombie & Fitch.

News that the Bank of England had kept interest rates on hold at 0.5 per cent for the eight consecutive month and the limit of the planned asset purchase unchanged at £175billion came as no surprise.

However, there will be uncertainty next month when the Monetary Policy Committee has a new set of Inflation Report forecasts and the Bank of England will have met the current quantitative easing target.

Kazakhmys led miners north with a gain of 54p at 1,152p. Antofagasta put on 37p to 834.5p, Eurasian Natural Resources 41p to 942.5p, Xstrata 40.5p to 965.5p and Lonmin 63p to 1,609.75p. Gold stocks glittered with Anglo American up 84.5p at 2,182.5p and Rio Tinto 102p better at 2,840.5p.

Trendy fashion group Burberry rose 28p to 532.5p after Nomura advised clients to buy ahead of Wednesday's second-quarter trading statement. The Japanese love its trademark black-red-tan tartan trenchcoats and hats. so the broker is confident that Burberry can continue to gain market share while improving its profitability.

Lloyds Banking Group, 43 per cent owned by the UK taxpayer, slipped 1.35p to 94.31p on continuing fears that a £15billion capital raising is on the horizon. Oriel Securities estimates the equity required to rebuild Lloyds' core tier 1 ratio to 8 per cent without using the government's Asset Protection Scheme would be in excess of £18billion.

Housebuilders erected good gains after Morgan Stanley turned bullish, believing constrained housing supply should drive house prices higher. Its preferred stocks are Barratt Developments, 17.4p up at 266.8p, and Taylor Wimpey, 1.76p better at 45p. Meanwhile, speculation persists that TW has lined up a buyer for its North American housebuilding operations.

KBC Peel Hunt lifted its Victrex target price 50p to 800p after the chemicals company gave a positive trading update.The board expects 2009 profits to be in line with expectations.

AIM-listed wave power company Ocean Power Technologies, rose 5p to 322.5p following its entry into the Japanese market via a tie-up with blue chip local companies for a 10MW wave power station. The news precedes an institutional roadshow in London next week hosted by Nomura Code.

Patagonia Gold added 0.75p at 16.25p after rolling out a resource estimate on its Cap Oeste gold/silver project in Argentina. It now shows a total of 655.932 ounces of gold, an increase of 90pc on the last estimate. Adding on the estimate from the neighbouring Lomada project, the company has now established around 893,000 ounces of gold and expect to top 1m ounces before the end of the year.

Copper and nickel explorer Discovery Metals firmed 1p to 25.25p after announcing a joint venture with Japanese state-owned mining agency, Japan Oil Gas and Metals National Corporation, for its Dikoloti nickel project in north-east Botswana.

After a hefty overhang of 71m shares were cleared, Nostra Terra Oil & Gas edged up 0.02p to 0.35p.

Coms buzzed 0.25p higher to 9.5p after it was selected to supply HelpAge International with a telephone system that will save the charity in excess of 25 per cent of its monthly telecoms budget.