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.