Market report: Monday close

By Mickey Clark for MailOnline
Updated: 13:06 EDT, 19 March 2007

A move today by the London Stock Exchange to pare back the spread on seven blue-chip companies, from a quarter of a penny to just a tenth of a penny, has raised a few eyebrows among market-makers.

The seven are ITV, unchanged at 107p, Royal & SunAlliance, 5¼p better at 165p, DSG International, down 0.40p at 174.10p, Vodafone, 2.85p firmer at 142.10p, Legal & General, 4¼p higher at 154½p, Old Mutual, 2½p dearer at 165½p, and Cable & Wireless, 3.80p up at 168.80p.

The LSE says the move brings it into line with European Union requirements, but cynical market-makers say it is just another way of making more profits for the LSE, a listed company with shareholders to please.

They complain the move to narrow the spread between bid and offer means more trades will be required to complete a transaction when the business is conducted in size via the market's computerised order book. Every hit on the order book means more money for the LSE, whose own shares rose 40p to 1253p.

The London market was marked higher, taking its lead from impressive gains in Asia this morning. The FTSE 100 index closed 58.8 points higher to 6186.4 as Wall Street initially climbed more than 100 points this afternoon.

AstraZeneca was amongst the biggest blue-chip casualties, falling 20p to 2861p after falling again at the last hurdle with one of its new drug developments. AGI-1067 - a treatment for the build-up of fat, cholesterol and other substances in the lining of arteries, which it had been developing jointly with US partner Athero-Genics - had failed to live up to expectations. Navid Malik at Collins Stewart says this is the latest in a string of phase three failures and will fuel investor concern over the pipeline. AZ had limited its investment into AGI-1067 to $50m (£25.7m).

Imperial Tobacco dropped 45p to 2285p after Spanish rival Altadis rejected its €45-a-share offer over the weekend. The deal would have valued Altadis at £7bn, but the Spanish group says a fairer offer would be worth £9bn.

City speculators say Altria, parent of the Philip Morris tobacco group, will be keeping a close eye on the situation and may decide to make a move for Altadis, or even take on Imps. The tobacco industry is currently undergoing some sharp consolidation, with Japan Tobacco recently snapping up Gallaher.

Supermarkets giant J Sainsbury rose 1p to 557p. The City is still waiting to hear the terms of a bid from a consortium of private-equity companies led by CVC Capital Partners. The consortium has been given until 13 April to put up or shut up.

Seymour Pierce has raised Sainsbury's shares from sell to hold, arguing that the odds on a bid materialising have shortened. It reckons there are three groups looking at the food retailer, all with their eyes on a property portfolio that could be worth upwards of £8bn.

The banks have been revived by talk that Barclays will bid for Dutch rival ABN Amro. Not everyone believes it is cut and dried. Some think Barclays, down 5½p at 677p, now risks joining an expensive auction, or being swallowed itself. Either way, Lloyds TSB rose 14p to 548p, Bradford & Bingley 11p to 450¾p and Standard Chartered 33p to 1428p.

Mothercare rose 18¾p to 377¾p after the retailer said it was planning to buy Chelsea Stores, owner of the Early Learning Centre chain, for £85m via a mixture of cash and shares.

Elsewhere on the High Street, troubled music retailer and Waterstone's bookshop chain HMV dipped 5½p to 117¾p after Goldman Sachs downgraded the shares from neutral to sell and cut its target from 140p to 100p.

The US broking house has also added HMV to its Pan Europe Sell List, warning that the group's new strategy is unlikely to offset structural pressures surrounding the business.

TAKING STOCK

BANKING AND FINANCE

California politicians are mulling a move to force state pension funds to dump shares in companies that deal with Iran. It could mean the world's biggest fund, Calpers, would have to sell shares in BNP Paribas, Siemens and Eni of Italy. 'Who's funding terrorism? It sure as hell shouldn't be our public employees,' said Republican Joel Anderson.

BUILDING AND PROPERTY

HM Revenue & Customs has withdrawn objections to Big Yellow Group becoming a real estate investment trust. The group applied in January, but was blocked while the status of its income was clarified. It now plans to carry out a valuation of its qualifying property assets to establish the amount of the 2% conversion charge.

CONSUMER

ABN Amro has riased its price target for Cadbury Schweppes from 540p to 600p and repeated its hold rating. The broker made the move to reflect the valuation of its two businesses, confectionery and soft drinks, once they are split in two. It sees little scope for further improvement in the price following last week's strong run.

ENGINEERING

Sensors made by TT Electronics will be fitted to the accelerator pedal systems of most new BMWs from the second half of this year. TT expects eventually to be delivering a million accelerator-pedal sensors a year to the German car giant. Pre-tax profits for last year at the British engineer were £30.5m.

HEALTH

Tests have discovered that Glaxo-SmithKline's Advair, given in combination with Pfizer's Spiriva, failed to reduce significantly the symptoms in patients with smoker's lung. Researchers in Canada conducted a study of 449 patients with the illness, which encompasses chronic bronchitis and emphysema.

INDUSTRIALS
BP is expected to be stringently criticised by tomorrow's external report into the Texas refinery blast of 2005 that killed 15 people and injured 500. An internal report showed employees of the oil giant putting in unacceptably long hours, while maintenance work was delayed and training was scaled back.

LEISURE

Shares in pubs chain Mitchells & Butlers soared 321/2p to 765p today on renewed talk that tycoon Robert Tchenguiz is preparing a hostile bid. Tchenguiz wants M&B to spin off its £5.5bn property portfolio, an idea that the company is considering. The investor has built up a stake of 16% in M&B.

MEDIA

Broadcaster UTV, which owns the Northern Ireland ITV franchise, said it would not rule out a fresh bid for Virgin Radio owner SMG despite merger talks collapsing last month. The renewed interest came as UTV, which owns radio stations including talk-SPORT, posted a 6% increase in fullyear operating profits to £27.4m.

NATURAL RESOURCES

Burren Energy is spending £155m to take its stake in Congo's huge M'Boundi oil field up from 31% to 37%. It is buying a stake from ENI as part of the Italian explorer's $1.4bn takeover of the 48.5% stake currently held by France's Maurel et Prom. The Burren/ENI carve-up ends weeks of speculation about the future of M'Boundi.

RETAIL

First-half numbers from Debenhams got the thumbs-down from the City on Friday. The UK's second-largest department store group has seen underlying sales continue to fall. Merrill Lynch has cut its price target from 220p to 210p and says like-for-like sales to the end of February, had further declined from 4.5% to 6%.

SUPPORT SERVICES

Pest-killer ServiceMaster is being bought by private-equity firm Clayton Dubillier & Rice for $4.7 billion (£2.4bn). ServiceMaster, which owns brands ranging from ChemLawn and Terminix, carries out services ranging from termite extermination to carpet cleaning and landscaping. Shares in its British counterpart Rentokil rose on the news.

TECHNOLOGY

Satellite navigation systems maker Trafficmaster's operating profits jumped from £1m to £6.3m last year after it doubled sales. The firm, whose systems give directions to drivers and warn of traffic jams and speed cameras, benefited from a deal with Norwich Union for the pay-as-you drive insurance scheme.

TELECOMS

The Australian division ofHutchison Whampoa, owner of mobile phone service 3, plans to raise A$2.85bn (£1.17bn) in a share offering aimed at cutting debt and interest costs. Hutchison Telecommunications' shares crashed 12% amid concerns about how the new issue would dilute the value of its existing shares.

TRANSPORT
America's United Airlines has broken ranks with British Airways and Virgin Atlantic to back 'open skies' deregulation at Heathrow. The cost to United, American, BA and Virgin of opening up the airport's lucrative New York slots to rivals are outweighed by wider benefits of deregulation elsewhere, it says.

UTILITIES

Dresdner Kleinwort has raised water supplier Pennon from add to buy following recent share price weakness. It has also taken into account the £588m sale of Cory Environmental, which equates to 650p per cubic metre of landfill and 14 times earnings. Applying the same to its Viridor Waste subsidiary would add up to 70p to its 600p target.