Market report: Thursday close

A TWO-WAY pull has developed between leading City houses over the outlook for mining. Today, UBS took an upbeat view, reflecting the recent strong rise in the price of gold, platinum and copper. It says the weak dollar remains the only threat to profits.

Metals have traded strongly of late, with investors using them as a hedge against volatile financial markets and the mounting threat of terrorism.

UBS has raised its rating on Rio Tinto, up 7p at 1410p, from hold to buy and lifted its 12-month target from 1400p to 1625p. It has also lifted BHP Billiton, 1/4p cheaper at 441 1/4p, from hold to buy and lifted its target from 475p to 525p.

The broker maintains a neutral rating on Anglo American, 8p better at 1233p, but has raised its price forecast by a more-conservative 100p to 1275p, saying it sees little scope for further improvement. It blames the impact of a stronger-than-expected South African rand on profits.

UBS has raised its earningsper-share estimate for Rio by 4% for next year and 5% in 2005. It lifted BHP Billiton by 14% for next year and Anglo American's forecast by 16%.

Only yesterday, rival broker Dresdner Kleinwort Wasserstein told clients it was keeping an underweight rating on the sector, cutting BHP Billiton from hold to reduce and Anglo American from reduce to sell. It suggested switching out of Anglo American and into Rio Tinto, which it has upgraded from sell to hold. Its overall view of the sector remains underweight.

Prices traded in a narrow range without the support of Wall Street, closed for Thanksgiving. The FTSE 100 ended down 9.20 points at 4361.1.

Airfreight group Exel took off, leading the top 100 companies higher with a rise of 24p to 759p. UBS has tipped it as a buy and raised its profit forecast. Exel has suffered three years of below-average growth, but UBS says it is set for a renaissance next year.

Debt-laden Telewest Communications fell 0.04p to 1.88p as it cleared the final hurdle before proceeding with a £3.5bn refinancing. The debt-for-equity swap will give bondholders 98.5% of the firm.

GUS fell 6 3/4p to 750p after broker Merrill Lynch placed a further 7.5m shares of its holding in Burberry with institutions.

The shares were placed to satisfy excess demand created by the recent placing of 50m Burberry shares by GUS. The sale has reduced GUS's holding in the fashion retailer from 77% to 66%.

Brokers have become avid viewers of Carlton Communications, 3p cheaper at 233p, and Granada, 2 3/4p off at 124 1/4p, ahead of the ITV broadcasters' proposed £4.5bn merger next year. But they appear unsure about prospects for the enlarged company after yesterday's trading updates.

Deutsche Bank has downgraded both from buy to hold. Lehman Brothers repeated its overweight rating and raised its target for Carlton from 238p to 257p and for Granada by 10p to 140p. Goldman Sachs is also seen as a buyer of both.

Rank tumbled 16 1/2p to 285 1/4p on a disappointing trading update. Deutsche Bank has cut the shares from buy to hold and is planning to downgrade its profits forecast. The group described operating profits in the second half as flat. Internet bank Egg, controlled by Prudential, firmed 1/2p to 130p after a buyer snapped up a line of one million shares at a little more than the ruling market price.