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European stocks rally on Rio Tinto shake-up

European stocks rally on Rio Tinto shake-up
AFP
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First Published: Fri, Jun 05 2009. 03 28 PM IST
Updated: Fri, Jun 05 2009. 03 28 PM IST
London: Europe’s main stock markets rallied on Friday, lifted by soaring heavyweight mining stocks as Rio Tinto called off a tie-up deal with Chinalco, and following gains in Tokyo and overnight on Wall Street.
In morning trade, London’s FTSE 100 index of leading shares jumped 1.56% to 4,455.48 points, as investors in London waited to see if Britain’s under-fire Prime Minister Gordon Brown would keep his job.
In Paris the CAC 40 climbed 1.09% to 3,348.29 points and Frankfurt’s DAX 30 advanced 0.59% in value to reach 5,094.68.
The DJ Euro Stoxx 50 index of leading eurozone shares increased 0.88% to 2,509.00 points.
On the currency market the euro rose to $1.4197 while the pound fell sharply against its main rivals.
“After three successive losing sessions, the FTSE is eyeing something of a break from the trend today with the news that dual listed Rio Tinto has abandoned plans to sell more of the stock to Chinalco likely to dominate for many,” said CMC Markets dealer Matt Buckland.
Mining giant Rio Tinto on Friday cancelled its controversial tie-up with China’s Chinalco in favour of a joint venture with fierce rival BHP Billiton and a $15.2 billion rights issue.
Shares in the Anglo-Australian firm Rio Tinto soared 10.1% to 2,996 pence in London after the announcement, which spared Australian Prime Minister Kevin Rudd from making a politically fraught decision on whether to approve the Chinalco deal.
Rio chairman Jan du Plessis said commodities prices had recovered since state-owned Chinalco made its bid to invest $19.5 billion in Rio, making that deal less attractive.
Metals prices jumped on the news, in turn lifting the mining sector. BHP Billiton surged 9.34% to 1,592 pence in London, while in Paris the world’s biggest steel producer Arcelor-Mittal jumped 3.46% to €24.81.
Also in focus on Friday was Prime Minister Brown’s battle to stay in power after a British government minister called for his resignation, while the ruling Labour Party faced heavy local and European poll losses.
In a shock move as polls closed late on Thursday, James Purnell stepped down as work and pensions secretary, prompting Brown to reshuffle his government in a bid to relaunch his premiership.
Purnell, tipped as a rising star and possible future leader, is the third cabinet minister to quit this week -- but the first to call openly for Brown to go.
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First Published: Fri, Jun 05 2009. 03 28 PM IST
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