A strong performance from mining stocks outweighed a fall in pharmaceutical shares yesterday, helping the market recover from earlier losses.
AstraZeneca was among the fallers after disappointing results from Swiss drugmaker Roche and an underweight recommendation from Lehman Brothers. Its shares lost 34p to £29.50, though dealers pointed out it did go ex-dividend yesterday. GlaxoSmithKline was down 8p to £14.00 ahead of results today.
Also on the way down was hedge fund group Man after Dresdner Kleinwort cut its recommendation from buy to add. The shares lost 9p to 570p despite the tone of the Dresdner note being fairly upbeat. It upgraded its earning forecasts to reflect "the strong operational momentum shown by Man Investments and the possible disposal of Man Financial" but it downgraded because of a 5% rise in the shares so far this year. Dealers are expecting Man to announce a demerger of its brokerage arm in March, with the move taking place this summer. "We feel that on the balance of probabilities some form of demerger will occur," said Dresdner.
On top of all that, Man announced late on Tuesday that its AHL fund had seen a 2.84% fall in its asset value last week. These falls pushed the FTSE 100 lower in the morning but it recovered to close 23.2 points higher to 6369.5, a new six-year peak. Despite the gains there is still some nervousness ahead of today's interest rate decision by the Bank of England, with most economists suggesting it was too close to call.
BHP Billiton was a star performer, up 54.5p to £10.40 as it announced a hefty $10bn share buyback programme after profits jumped 41% in the first half of the year. The company announced the surprise resignation of chief executive Chip Goodyear. The news helped Vedanta Resources, up 42p to £12.36p, and Anglo American, 66p up at £24.71.
British Airways climbed 25.5p to 574p after Merrill Lynch issued a 22-page buy note with a 700p price target. "We think the current share price is not yet discounting any potential value from BA's move to Heathrow's Terminal 5 in 2008," said Merrill. "Our initial analysis suggests revenue and cost savings upside. We expect further details at the investor day on March 7."
Low cost rival easyJet slipped 15p to 675p despite first-quarter revenue rising 15% and a prediction of a sharp rise in profits this year. Analysts at Barclays Wealth said they expected investors to take profits after a recent good run for the shares. Collins Stewart added: "EasyJet is at best a hold and if the shares rise too much further, we would encourage investors to sell."
After the downbeat reaction on Tuesday to its results, BP edged back up 3.5p to 538.5p. Deutsche Bank retained its buy rating but cut its price target from 630p to 580p.
On the takeover front, J Sainsbury added 3.5p to 519.5p awaiting more news from the potential private equity bidders. Advertising group WPP was 12p better at 755p after upbeat trading news from rival Publicis. Analysts at Panmure issued a buy note saying, "We would flag the 6% discount to Publicis based on 2007 estimated earnings, in favour of WPP. Additionally WPP has higher exposure to Asia Pacific, which we consider is a major plus in the investment case."
Cruise group Carnival recovered 44p to £26.71 after recent weakness, with Collins Stewart saying the falls provided a buying opportunity. Lloyds TSB was steady at 598.5p despite news that the Competition Commission will investigate payment protection insurance, where Lloyds is a big player, and a report that its pension deficit was higher than expected, which the bank takes issue with. Dresdner Kleinwort said the alleged size of the deficit was "implausible" but there were plenty of reasons to sell Lloyds , not least because they are dear compared with the bank's peers.
Elsewhere, publisher Emap was the biggest faller in the FTSE 250, down 34.5p to 774p after it warned its performance for the year would be at the bottom end of expectations. British Energy lost 12.5p to 440p as it revealed the timing of a restart at its Dungeness B22 reactor was uncertain and would remain so until a series of tests is completed.
One of the day's disasters among the smaller fry was Aim-listed video streaming company Vividas. It fell 9.5p to 55p - a 14% drop - after it warned results for the year would fall short of forecasts.
Brand management company DIC Entertainment was another loser, down 34p to 158.5p, after analysts at Bridgewell downgraded from neutral to underweight "until such time as the management can give greater clarity on the outturn for 2007". Surveillance systems group Petards added 0.125p to 1.075p after saying operating profits were likely to be ahead of expectations, while debt would be lower. It has won a £3m contract with BAE Systems to supply software and hardware, and also support and maintenance for five years.
Biofuels Corporation, added another 6.25p to 43p on bid hopes and ahead of a possible fundraising. And Renewable Energy Holdings added 7.5p to 45p. Traders said a big seller had been cleared out and buyers were now pushing the price higher.
Halma caution
It can't have been the intention, but analysts returned from a visit to the Belgium business of engineering firm Halma distinctly underwhelmed. The group visited BEA, which supplies sensors to control automatic doors and makes about 8% of Halma's annual sales.
BEA gave an upbeat assessment of future prospects. But Citigroup said the current rate of growth was unlikely to be sustained, adding: "To continue to justify the current high rating on the shares, management will need to continue to create value through acquisitions. In the current environment - high asset prices coupled with Halma's conservative valuation approach - this is likely to prove challenging." Citigroup told clients to hold, while Arbuthnot cut from buy to neutral. Halma slipped 4p to 235.5p.