- MORNING REPORT: Headline shares made strong gains in early deals today, led by steep rises in Rio Tinto and BHP Billiton shares in the wake of Rio's decision to abandon plans for investment from Chinalco in favour of a rights fund-raising.

At 9:00am, the FTSE100 was up 67.09 points at 4,454.03 with the FTSE250 ahead 76.09 points at 7,736.16 and the FTSE Smallcaps 10.91 points better at 2,313.43.


In the US last night, the Dow Jones Industrial Average added 74.96 points at 8,750, while the S&P500 rose 11 points at 942 and the Nasdaq Composite gained 24 points at 1,850.

In Asia today, the Nikkei was up 99.05 points at 9,768.01, while the Hang Seng was last up 86.12 points at 18,588.89.


The early focus was on Rio Tinto following news it has dumped its proposed deal with Chinalco in favour of fund-raising through a rights issue and an Australian joint venture with BHP Billiton.

Investors will be offered 21 new shares for every 40 they hold in Rio Tinto at 1,400p each, a discount of 49% to yesterday’s closing price.

Shares in Rio Tinto soared 281p (10.3%) at 3,001p, while BHP Billiton stormed ahead 131p (9%) at 1,587p.

The whole sector saw firm gains, with ENRC the best of the rest, up 33p at 669p, Antofagasta ahead 26.5p at 646p and Vedanta Resources up 75p at 1,601p.

Oil majors were also in big demand following a surge in crude prices overnight and the price of a barrel of oil edging towards $70. Shell gained 33p at 1,724p, BP rose 5.5p at 529p and BG Group added 26p at 1,149p.

Carphone Warehouse was buoyant, up 5.75p at 178.25p, after revealing full year underlying EPS of 12.6p and reiterating its guidance for the full year. The phone giant also confirmed it will split itself into two separately listed companies by July next year.

Political concerns took their toll on the pound this morning but it did nothing to stymie progress amongst the banking fraternity.

Barclays made the most progress, up 8.25p at 274.25p, while Lloyds gained 1.3p at 68.4p and Royal Bank of Scotland moved up 1.1p at 38.3p.

Supermarket operators Tesco and Sainsbury took a lead from news from Waitrose of a strong sales surge last week, up 7.5p at 368.3p and 2.75p at 324.75p, respectively, but peer Morrisons succumbed to profit-taking after yesterday's gains, down 1.25p at 252.75p.

Notable among the small number of blue chip losers, non-life insurer Amlin fell 8.5p at 331p, Associated British Foods dropped 6p at 738p and chocolate maker Cadbury slipped 4.5p at 540p.

Down the list, brewer and pubco Fuller Smith & Turner added 11p at 507p on saying it was well placed to meet the challenges ahead, after revealing that pretax profit dipped to £14.4m in the year ended March, compared with £23.8m the prior year. Revenue was up 3% to £210m.

Hobby group Hornby dipped a penny at 96p after announcing a full year pretax profit of £6.1m, down from £9m, and omitting a final dividend.

Dragon Oil dropped 12.25p at 390.25p after Emirates National Oil which already owns 52% of the company confirmed it had made an approach to buy up the rest of the shares, but cautioned any offer would only be at a modest premium.

Story provided by Business Financial Newswire