Mining stocks tick higher on iron ore rebound, FTSE 100 stuck in the mud, breakthrough for Barratt’s takeover of Redrow

“The mining sector was a rare bright spot on the FTSE 100 on Wednesday as names including Rio Tinto and Glencore pushed higher amid stronger metal prices,” says Dan Coatsworth, Investment Analyst at AJ Bell.

“Just days after iron ore prices hit their lowest level in two years, the metal staged a small recovery amid hopes that stimulus measures in China could help to avoid a major slump in demand for the metal.

“Iron ore is a key component in steelmaking and is used in property construction. China has suffered from a big slump in its real estate sector, with countless properties either sitting empty or half-built. Reports that local governments in the country might be allowed to buy unsold homes received a positive reaction from the markets, but it is hard to see how this will be enough to properly rejuvenate the sector.

“Despite the mining sector ticking up, it wasn’t enough to lift the overall UK index, with the FTSE 100 flat at 8,277. Energy, healthcare and utilities acted as a drag on the index.

Barratt Developments / Redrow

“It looks like Barratt’s attempt to buy Redrow is on the verge of being given the green light. The CMA has indicated it might be willing to accept Barratt’s tweaks, meaning the takeover is likely to avoid a more in-depth probe from the watchdog and can head towards completion.

“This would be a huge relief to Barratt’s management, who no doubt want to wrap up the deal as quickly as possible and take advantage of the opportunities created by the new UK government’s pro-housing policies.

“The takeover would give Barratt greater buying power for raw materials just at a time when planning laws are expected to be relaxed as part of Labour’s push to improve the country’s housing situation. After several years of inflationary pressures, any savings made by Barratt on the materials used to build homes would be a major benefit for the group.”

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