Market Report: Glencore's cost cuts win over Deutsche Bank

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Ivan Glasenberg, the notoriously stubborn chief executive of Glencore, is not one for pandering to the City, but his efforts to placate disgruntled investors appear to be paying off.

The South African’s slimming down of the trading-cum-mining giant’s huge debt pile by selling off non-core assets has found him a friend in the form of Deutsche Bank.

It became the first top-tier broker to upgrade Glencore since the September slump when 30% evaporated from the company’s stock market value in a single day.

Deutsche analyst Rob Clifford upgraded the stock to Buy and even inflated his target price from 190p to 200p.

He said: “Glencore still needs to rebuild its relationship and trust with equity investors. However, the rapid debt reduction plans should remove the balance sheet and trading fears.”

Investec, the culprits of Glencore’s decline, were unconvinced and said the outlook remains “bleak”.

The upgrade helped the shares rise 0.35p to 126.2p — not a huge gain but on a day when the mining sector was firmly in the red, it was a relative surge.

Anglo American was the biggest blue-chip casualty, 21.6p or 3.7% lighter at 557.5p, and Anglo-Aussie iron ore giants BHP Billiton and Rio Tinto were not far behind, down 15p to 1054.5p and 36p lower at 2334.5p respectively.

Miners dragged the FTSE 100 down 38.06 points to 6374.82 as expectations increased that the US Federal Reserve will raise interest rates before the year is out.

That boosted the value of the dollar, which in turn hit the prices of metals and oil — commodities that are priced in dollars and therefore become more expensive to hold. It caused BP to slip 10.9p to 391.15p and Shell to retreat 42.5p to 1725.5p.

Strong third-quarter results from AstraZeneca injected life into the pharmaceutical sector: Astra itself rose 3% or 124p to 4251.5p. Its peer Shire was 104p or 2.2% healthier at 4813p and Hikma was 33p better off at 2083p.

Investors gave energy providers the cold shoulder as big-hitter Goldman Sachs predicted a global gas glut would drive down European gas prices. SSE fell 12p to 1527p, and British Gas parent Centrica was down 4.44p to 227.56p.

Rentokil was off all-time highs, down 0.3p to 154.8p, as the pest-control group repeated full-year guidance after boosting revenues from ongoing operations by 4.8% in the third quarter to £436.2 million.

An expected annual loss of £5 million at Snoozebox, whose mobile hotels provide accommodation at events such as Glastonbury and the British Grand Prix — and which is fronted by former Formula 1 star David Coulthard — knocked investors’ confidence in the AIM-listed firm. The “trail-blazing strategy” of big spending for fast expansion was to blame.

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November 5, 2015 |
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