Market report: Thursday close

By Mickey Clark for MailOnline
Updated: 11:59 EDT, 28 June 2007

Rising oil and energy prices are expected to outperform a faltering stock market in the months ahead, says one of the City's big-hitters.

Morgan Stanley reckons that is a good enough reason to start buying the big oil explorers, and its nap is Royal Dutch Shell, which at current levels is worth as much as $120bn (£60bn). Shares in the Anglo-Dutch giant were today nudging back toward record highs with a rise of 52p to 2060p as the broker lifted its target from 2025p to 2300p.

Morgan says the industry view is that energy will outperform the equity market, and that has enabled it to start taking an increasingly bullish view of the supermajors, although historically it has been bearish. Sentiment spilled over into BP, up 12p at 599½p, while BG Group rose 20p to 812p.

Oil industry services provider Wood Group enjoyed another burst of speculative buying that lifted the shares 16p to a new peak of 336p. The name on the lips of speculators is support-services group Amec, 34p better at 596p, which would have to offer at least 370p a share, valuing the group at £1.4bn.

The move coincided with news that Wood had landed a £10m contract with French industrial and gas supplier Air Liquide to provide maintenance for its gas turbines in the Netherlands.

Shares in general set about clawing back some of this week's losses, underpinnedby rallies on Wall Street overnight and in Asian markets this morning. Despite the prospect of further interest-rate rises, the FTSE 100 index was 43.7 points ahead at 6571.3. Wall Street posted small losses this afternoon with the Dow down 4.60 to 13,423.10.

Cadbury Schweppes, which recently announced plans to split its confectionery and soft drinks business, rose 15½p to 676p after it emerged that US activist investor Nelson Peltz had increased his stake in the company to just above 3%, or 73m shares, worth £491m.

Property shares bounced off recent lows with investors taking the view they have been oversold. British Land rose 22p to 1362p, Segro, previously known as Slough Estates, 4p to 637½p, Hammerson was down 7p to 1460p and Liberty International up 17p to 1173p.

Reports that property developer Robert Tchenguiz had doubled his stake in J Sainsbury to 11% via contracts for difference lifted the shares 6½p to 583½p. Leisure group Whitbread stood out with a jump of 31p to 1770p on vague talk that it could soon be the subject of a takeover.

Northern Rock slipped a further 5p to 829p in the wake of yesterday's profits warning. HSBC has downgraded the shares from overweight to neutral and slashed its price target from 1411p to 900p. Shares in the mortgage lender tumbled after it said 2007 underlying profits were set to rise by about 15%, against the 17% analysts expected.

The broker believes that although Northern Rock came under pressure from the base rate-Libor gap, this had already been factored into the stock price and the real source of the profits warning was a serious misjudgment by management in the rate cycle, leaving it exposed to rising swap costs. Meanwhile, UBS has repeated its neutral rating on the shares but slashed its target from 1120p to 920p.

There was some heavy turnover in LogicaCMG, with more than 36m shares changing hands as the price rose 3½p to 152p. Morgan Stanley is reckoned to have placed 18m shares with various institutions at prices between 151p and 152p. This coincided with Theodoor Gilissen raising its rating on the shares from sell to buy with a price target of 174p.

Software specialist Micro Focus shaded 8p to 251p despite Panmure Gordon raising its rating from hold to buy after better-than-expected profits.

It was the first day of trading on Aim for Monitise, which traded at 22¼p after a placing at 22p.

TAKING STOCK: Market news at a glance

BANKING & FINANCE
Bear Stearns reckons the problems that led to yesterday's profits warning from Northern Rock are unique to the company and should not affect other mortgage lenders. It warns that there is a structural mismatch between its Liborbased funding and base rates, which means the bank's business model is flawed in the current rate environment.

BUILDING & PROPERTY
Speculative buying lifted Helical Bar yesterday. Word is the property developer's biggest shareholder, Michael Slade with about 13% of the stock, wants to take the company private. It is not a new story but some traders insist that such a move would come as no surprise. At current levels, the company is worth about £420m.

CONSUMER
Shares of Unilever were chased higher in London and Amsterdam yesterday on vague talk of stakebuilding. There was also speculation that the Lipton tea and Knorr soup group is planning further asset disposals. The Anglo-Dutch giant said earlier this week that it will sell its margarine brands, which include Flora.

ENGINEERING
Evolution has repeated its buy rating and 220p target on Foseco following the industrial engineer's positive trading update yesterday. The broker expects it to reverse the poor performance of the shares in the past month, during which they underperformed by 8%. It says the market has not factored in the steel divsion's recovery potential.

HEALTH
Credit Suisse has repeated its outperform rating and 500p target on Hikma Pharmaceutical following this week's trading update. It is impressed by the group's access to the rapidly growing and fragmented MENA branded generics market, above average operating margins and modest rating of the shares.

INDUSTRIALS
Electric vehicle developer Tanfield has raised £115m via a placing at 163p to fund a substantial buy. The company expects the acquisition to be 'significantly' earnings enhancing in the first full-year of ownership. Negotiations are well advanced and an announcement will be made within the next couple of weeks.

LEISURE
Harry Potter publisher Bloomsbury said today export pre-orders for the next book on the boy wizard's adventures are 17% better than total export sales for the previous instalment of the best-seller. Bloomsbury plans to launch the seventh and final Potter book, Harry Potter and the Deathly Hallows, on 21 July.

MEDIA
Citigroup has raised former bid target ITV from hold to buy to reflect an improvement in advertising, which it says should lead to greater investment. Citigroup has lifted its advertising growth forecast for this year to minus-6% from minus-6.9% and for 2008 from minus-3% to minus-2% and raised earnings estimates for 2010 by 10%.

NATURAL RESOURCES
Avocet Mining has confirmed its subsidiary Commonwealth & British Minerals is in merger talks with China's Zijin Mining. But it insists that no binding agreements for the sale have been signed. The price is likely to be significantly below the £85m that has been bandied around in some quarters of the Square Mile.

RETAILING
It's not just the folk in Yorkshire who are suffering from the wet weather. Oriel Securities reckons Marks & Spencer will also be counting the cost of a poor summer on its food sales. As a result, it has slashed its target from 675p to 600p, and warns its like-for-like food sales target of 2.6% is looking optimistic.

SUPPORT SERVICES
Debt solutions provider Invocas has been raised by Charles Stanley from buy to add following maiden results that confirmed strong profits growth on the back of heavy investment in the business. The broker says demand for protected deeds remains robust and the group is maintaining good relationships with creditors.

TECHNOLOGY
Chairman David Lee has topped up his holding in software specialist Tadpole Technology with the purchase of 150,000 shares at 5.25p each. The move raises his stake to onem shares, or less than 1% of the company. The shares' price reached 6.38p in March, having started the year at just a penny.

TELECOMS
BT today confirmed its wholesale business chief Paul Reynolds will leave the company in September to become chief executive of Telecom New Zealand. Reynolds, 50, has been on BT's board since 2001 but the promotion of Andy Green to an overarching position within the group was seen as damaging his chances of becoming chief executive.

TRANSPORT
UBS says full-year numbers yesterday from Stagecoach were ahead of expectations. Bus revenue growth was up 10.3% and Virgin Rail enjoyed strong volume and revenue growth. But the broker has repeated its neutral rating and 192p target without taking into account the benefits of the East Midlands franchise win.

UTLITIES
British Gas operator Centrica has been upgraded from underweight to overweight by broker Morgan Stanley, which has also jacked up its price target for the shares from 355p to 425p. Morgan Stanley said that the twin upgrade was based on its increasingly bullish outlook for Centrica's business prospects.