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Xstrata leads FTSE rebound as investors back Glencore merger

The oil price fell back after yesterday’s sharp rise amid reports that a ceasefire deal is to be announced in the Gaza conflict.

 
Xstrata leads FTSE rebound as investors back Glencore merger

(16.30 update) Shareholders in mining company Xstrata (XTA.L) have voted in favour of a proposed merger with commodities trader Glencore, prompting share price gains at the two companies and helping lift the FTSE 100 into positive territory.

Though giving their approval to a long-contended merger between the two companies, investors snubbed a controversial executive pay plan.

Shares in Xstrata topped the FTSE 100, up 3.7% to 991p. Glencore shares were 2% higher to 333p. ‘We recommend buying shares of both companies now,’ said analysts at Jefferies in a research note in response to the news.

‘We expect the merged company to be intensely focused on maximising returns on capital employed, with a uniquely strong bias to returning capital to shareholders rather than investing in large, capital intensive projects,’ they said.

The merger still needs approval from regulators in the European Union, China and South Africa.

The FTSE 100, meanwhile, shook off earlier losses to make small gains, rising to 5,745.

European markets were also up, while the euro was flat at $1.281, shrugging off Moody’s downgrade of France this morning (see report below).

US shares were slightly lower as investors focused on Hewlett Packard’s revelation that it would take an $8.8 billion (£5.5 billion) impairment charge, linked to ‘serious accounting improprieties’ by Autonomy, which occurred prior to HP’s acquisition of the firm.

HP has consequently asked US and UK regulators to investigate alleged misrepresentations of Autonomy’s financial position before HP bought the UK software company last year, according to reports.

The oil price fell back after yesterday’s sharp rise amid news reports that a ceasefire deal was to be announced in the Gaza conflict. Brent crude oil futures dropped by 1.4% to $110 per barrel.

Shares and euro slip as Moody's downgrades France

Markets slumped as credit ratings agency Moody’s downgraded France overnight from AAA to Aa1, with a negative outlook.

The group cited concerns about the country’s ‘deteriorating growth prospects’ and its lack of access to a national central bank for financing its debt in the event of market disruption. Moody’s also questioned the country’s growth forecast of 0.8% for the next year and 2014.

Standard & Poor’s downgraded the country earlier this year and ratings agency Fitch has also placed the country on a negative outlook.

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3 comments so far. Why not have your say?

Len Dowsett

Nov 20, 2012 at 11:33

My wife & I have Xstrata shares in our Barclay's ISA,s, We would like to know how Barclays voted. We do not see why Barclays could not let us know -perhaps by revealing their decision on their website under their Corporate Actions section, for this and any other such takeover decisions.. I would like to know if anyone agrees with my opinion, and then I will approach Barclays.

LRD

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an elder one

Nov 20, 2012 at 11:55

I would have voted against the merger, but seemingly personal holders of Xstrata in nominees don't get the chance.

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The Colonel

Nov 20, 2012 at 17:29

LRD In the same situation. Have had a B.stockbrokers ISA from when it was

Charles Schwab It used to much better then.

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