The pressure on Rio Tinto to scrap big mining projects increased yesterday as Moody’s, the ratings agency, gave warning that the group’s income next year would be squeezed by delayed asset sales and falling metals prices.

Rio Tinto has to repay $8.9 billion (£5.6 billion) of debt next October after buying Alcan at the peak of the commodity boom last year.

Rio has said that global financial turmoil may delay $10 billion of asset sales, but stated that it had no doubts that it could service its debt. Moody’s was more cautious, saying that Rio should be able to meet its October repayment unless metal prices decline “materially farther from current levels”. Most observers expect iron ore prices negotiated with China to be significantly lower when set next year.

If Rio’s cashflow is being squeezed and it has to cut big projects, BHP Billiton’s bid for it is likely to be viewed more favourably by Rio shareholders. Moody’s said that a takeover by BHP would help Rio’s credit rating. However, the dollar’s slide against most major currencies triggered a mini bounce in metals prices and shares in both Rio and BHP rose by nearly 5 per cent, in line with the mining sector. Rio gained 112p at £26.18. BHP was up 46p at £10.15.

The FTSE 100 closed up by 92.55 points at 4,364.96 on volumes way below average as traders complained of a “buyers’ strike” as the huge fall on Thursday created uncertainty.

Legal & General, having been higher all day, closed up by 94p, or 123 per cent, at 170p after a “fat-fingered” trade in the closing auction. Nearly two million shares were sold at 170p, against the 80p price during the day. The short-selling ban on financial stocks has reduced liquidity, particularly during the closing auction, creating anomalous closing prices for several insurers in recent weeks. Later the London Stock Exchange cancelled the closing auction trades, leaving L&G’s official closing price at 80p. 3i Groupfell 35p to 480p after a bigger than expected decline in the value of its portfolio was revealed on Thursday. Property companies were still on the slide after a downgrade on Thursday by Morgan Stanley, which had given warning that interest rate cuts would not end the drought in property loans. Growing fear of retail rent defaults or even administrations after a dire Christmas left Liberty International, the shopping centre owner, which on Wednesday doubled its provisions for failed tenants, down 37½p at 655p. Land Securities fell 28p to £11.04 and Hammerson, which is also exposed to retailing, lost 16p at 699p.

In the FTSE 250, Great Portland Estates lost 27p to 256¼p. UBS cut it from “buy” to “neutral”, giving warning of falling West End property values. Brixton fell 12¾p to 156¾p. Morgan Stanley noted that Brixton’s management had estimated that a fifth of its property would be vacant by the fourth quarter of this year. The vacant space is currently valued on the rent that it could secure when let, but the broker believes that, in a recession, buyers of property would assign little or no value to empty space.

Rentokil Initial rose by ½p to 47¼p after results broadly in line with poor expectations.

New York: Investors followed two days of losses with buying of beaten-down sectors, including energy and technology. The Dow Jones industrial average closed up 248.02 at 8,943.81.

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